University of Southern California Dissertations and Theses

A comparative study of price controls in the United States from 1942 to 1952

(USC Thesis Other)

A comparative study of price controls in the United States from 1942 to 1952

PDF

Download a page range

Download transcript

Copy asset link

Request this asset

Transcript (if available)

Content A COMPARATIVE STUDY OP PRICE CONTROLS IN THE UNITED STATES FROM 19^2 TO 1952 A Thesis Presented to the Faculty of the Department of Economics The University of Southern California In Partial Fulfillment of the Requirements for the Degree Master of Arts by Gwendolyn Peyton Hunter January 1955 UMI Number: EP44739 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. UMI Dissertation Publishing UMI EP44739 Published by ProQuest LLC (2014). Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code ProQuest’ ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 Ec. '55 H T h is thesis, w ritte n by Gwendolen...Peyton ..Hunter u nd e r the guidance o f h...§.V.Faculty C om m ittee , and a p p ro ve d by a ll its m em bers, has been presented to and accepted by the F a c u lty o f the G radu ate S chool in p a rtia l fu lfillm e n t o f the requirem ents f o r the degree o f Ma s t er o f_Arts Dean Date AUSUst___195i{-...... Faculty Committee Chairj&an TABLE OP CONTENTS CHAPTER PAGE I. INTRODUCTION.................................. l j The problem.................................. 3 Statement of the problem ................ 3 Importance of the study................... 3 Organization of the thesis ................. 5 i Sources of data............................... ' 7 | II. ECONOMIC DISTURBANCES IN MOBILIZATION ........ 9 i Inflationary pressures..................... 9 j Factors causing inflation ........... . . . 10 Money expansion and bank credit......... 10 Anticipatory buying and speculation . . . 11 The reduction of overseas shipments . . . 12 Transportation problems ................. 12 The absolute price of imported items . . 13 Government policies to aid specific groups .............................. 13 Supply and demand....................... 13 Increment in consumer incomes ............... 14 The labor force............................ 14 iv CHAPTER PAGE War goods production vs* consumer goods . . . 18 Military demands ......................... 18 Consumer shortages ............ 19 Housing ........ ............. ..... 20 III. LEGISLATIVE AUTHORIZATION OF OPA AND OPS . . . 23 The beginning of O P A ....................... 24 Predecessor agencies ..................... 24 National Defense Advisory Commission . . 24 Office of Price Administration and ^ Civilian Supply ....................... 25; Creation of the Office of Price ■ Administration 26 | s The blueprint for victory 27 i Emergency Control Act ....................... 27 Summary of the Act . . .......... 28 Establishment of maximum prices ........ 28 Control of prices of agricultural commodities........................ 29 Buying and selling commodities ..... 30 Price schedules already issued....... 30 Rent control........................ 30 Administration: Office of Price Administration ....................... 31 V CHAPTER PAGE Transfer of duties................... 31 Opportunity for protest afforded . . . 32 Judicial review of maximum price and i rent regulations ........ ..... 32 Review by the Supreme Court............. 32 i 1 Prohibitions and enforcement ........... 33 Price stabilization program of 1950 .... 34 Authorization of Office of Price Stabilization ............................ 34 Statement of policy.................... 35 Aims of the Act.......................... 36 ; Duties of the chief executive........... 36 Delegation of executive powers .... 37 Hoarding................................. 37 Penalties for violation ........ 38 Price and wage stabilization........... 38 Voluntary compliance .................... 39 Forced compliance ........................ 39 Ceilings for agricultural products . . 40 Power to establish controls and rationing.............................. 4l Right to protest regulations........... 4l Court jurisdiction after denial of CHAPTER vi PAGE protests............................ 42 Request of injunctions by the President............................ 42 Criminal penalties for violation of the section on wage and price controls and rationing ............. 43 Recovery of overcharges by buyer or the United States................... 43 Power to exercise consumer and real estate credit controls ............. 44 Penalties for violation of consumer and real estate credit controls . . . 45 Exclusions from the Act . . ........... 45 Professional services ................. 45 Publications ....................... 45 Insurance rates.......... 46 Rates on public utilities............. 46 Personal services ..................... 46 Rents in non-critieal defense areas . . 46 Exemptions..................... 47 Defense Production Act Amentments of 1951 • ^7 The Capehart Amendment ................. 47 Herlong Amendment ....................... 48 vii CHAPTER PAGE Halleck Amendment ....................... 48 Comparison of the economy under OPA and O P S ............................. 48 t Legal phases............................ 48 Evasions................................ 49 j i Price adjustments....................... 49 The freeze technique ................... 51 Application of price ceilings ........... 52 The price formula....................... 52 Dollar and cents ceilings ............... 53 Community pricing..................... 53 : Some problems of dollar-and-cents regulations......................... 54 Attitude toward farmers ................. 54 Provisions for subsidies ............... 55 Exemption of some commodities from control................................ 55 Inflationary course ..................... 56 Pattern of the stabilization program . . 57 Rent controls............................ 58 Consumer rationing ..................... 59 Conflictions of authority ............... 60 The generally fair and equitable viii CHAPTER PAGE criterion............................ 62 IV. ENFORCEMENT OF DIRECT PRICE CONTROL LEGISLATION FROM 1942 TO 1952 . ......... 64 Administration of OPA regulations......... 64- Scope of controls....................... 64 Legal division ....................... 65 Regulation notices ........................ 66 Federal enforcement ........................ 67 Criminal proceedings .................... 68 1 1 The treble damage action................ 68 ! The right to suspend licenses ........... 68 : Enforcement of injunctions ............. 69 j I Hecht v. Bowles C a s e .................... 69 Abuses under O P A ....................... 72 Rent control.............................. 72 Brand names ........................ 73 Distribution of gasoline .................. 74 A case against the ! , product standard" . . 75 Relief of individual companies from pricing regulations ...................... 76 Effectiveness of enforcement of OPA regulations................................. 77 Contradictory assertions of OPA ........... 77 CHAPTER ix PAGE The measures of effectiveness ........ 79 Enforcement of OPS legislation ........... 86 Nature of the program ........... 86 Types of interpretations............... 88 Classes of purchasers................. 88 I Increased transportation costs .... 88 Same commodity....................... 89 Changes in terms and conditions of s a l e ................................ 90 Deposit charges ....................... 90 New excise t a x ....................... 91 Tie-in sales .......................... 92 Protests................................ 92 The Safeway complaint ................. 93 Enforcement objectives ................. 95 Strengthening the program ............... 97 Sanctions against buyers ............. 97 Disallowance of fines, penalties and compromises in tax deductions .... 98 Court orders suspending licenses for violations committed after warnings . 98 Removing $10,000 limit on triple damage s u i t s ....................... 99 X CHAPTER PAGE Effectiveness of enforcement of OPS .... 100 Allegations of OPS ............ 100 Raw material prices..................... 100 Wholesale prices ..... 100 Pacts on OPS stabilization program . . . 103 Evasions of price control regulations . . . 105 Tie-in sales ............................ 105 Trade-in allowances ..................... 108 "Fancy” cuts of m e a t ..................... 109 Meat packers1 tricks..................... Ill Automobile "extras" ..................... 113 ! , I Black markets...................... ... . 114 ! i Price mark-ups............................ 116 Formula pricing procedure . ............ 117 Dollar and cents ceiling procedure . . . 118 t V. THE ECONOMICS OF DIRECT PRICE CONTROLS . . . 120 j Costs of OPA . . . ..................... 120 Rationing B o ards................. 120 Functions of workers ..................... 121 Monetary costs ............................ 122 Costs of O P S ................................ 123 Volunteers ................... 123 Distribution of workers ................. 12k xi CHAPTER PAGE Other costs....................... 124 Additional work.......................... 125 Provisions for added costs ............. 125 Skilled labor often required ........ 126 Effects of price controls ................. 126 Role in economic stabilization ........ 126 Effects on manufacturing ............... 127 Effects on meat production............... 127 Perpetuation of controls on non-scarce items.................................... 129 j Waste and distortion of production . . . 130 VI. DIRECT PRICE AND FISCAL-MONETARY CONTROLS . . 132 The direct price control policy 132 j Aims of the policy . . 132 ! The need for direct price controls . . . 133 Effects on production rates and prices . 134 Peak mobilization.......................... 135 Familiarity of the system................. 135 j Public sanction ............................ 135 Accumulation of liquid assets ............. 136 Direct price controls fail to prevent inflation................................ 136 Postwar problems .......................... 137 xii CHAPTER PAGE Allocation of resources ................ 137 Inflexibility of direct price controls . 138 Subsidies as an adjunct to direct price controls.......................... 138 Parity as an adjunct to direct price controls................................ 139 Rationing as an accompaniment of direct price controls . ..................... 140 Miscellaneous objections .............. l4l Fiscal-monetary controls ................ 142 Statement of policy........................ 142 The advantages of a fiscal-monetary policy closing the inflationary gap . . 143 Efficiency during mild mobilization . . 144 Flexibility of the system............... 146 Distribution of commodities ............. 147 Administrative "bungling" avoided . . . 147 Resource allocation .............. . . . 148 Disadvantages of the fiscal-monetary controls................................ 148 Tax rates.............................. 148 Slowness in adjustment ................. 149 Effects on business ............... 150 ____________________________________________________________________________1 xiii CHAPTER PAGE Destruction of incentives ............. 152 Direct price-fiscal-monetary controls . . . 152 Dual policy.............................. 152 The necessity for fiscal-monetary controls.............................. 153 Need for direct controls............... 15^ Criticisms of the unitary fiscal- monetary policy....................... 155 VII. SUMMARY AND CONCLUSIONS..................... 156 Summary.................................... 156 Effects of mobilization on the economy . . 156 Factors producing economic disturbances during mobilization ................... 156 Inflationary pressures................. 157 Increase in consumer buying power . . . 157 1 Increase in conversion of raw materials from civilian to military goods................................ 157 j Government stabilization programs ........ 1 5 8j The Office of Price Administration . . . 158j Aims of the A c t................ 158 The Office of Price Stabilization .... 158 Aims of the A c t ................ 159 xiv CHAPTER PAGE Legislative creation of OPA and OPS . . . 159 Success of OPA and O P S ................. 159 Costs of OPA and O P S ................... 160 Piseal-monetary controls . ............. 160 Aims of the method.......... 160 The advantages of the fiscal-monetary policy.............................. 160 Disadvantages of the fiscal-monetary policy................................ l6l Conclusions.................................. l6l 'BIBLIOGRAPHY........................................... l64 LIST OF TABLES TABLE PAGE I. OPA and Other Cases, Civil and Criminal, Commenced in 84 U.S. District Courts, Fiscal Years 1943-1947 70 II. Increases in Miscellaneous Goods and Services, 1940-1946 ....................... 8l III. Consumers' Price Index for Moderate Income Families in Large Cities, by Groups of Commodities................................ 82 IV. Consumers' Price Index for Los Angeles, 1941-1947 .................................. 83 V. Consumers' Price Index for New York City, 1941-1947 .......... 84 VI. Consumers' Price Index for Chicago, 1941- 1947 85 VII. Percentage Increases in Consumers' Prices, August, 1939-June, 1948 ..................... 87 VIII. Changes in Consumers' Prices Before and I i After the OPS Price Freeze Took Effect in February, 1951.......................... 102 t ------------------------------------------------------------ j TABLE IX. X. X I . xvi PAGE Changes in Prices of Defense Materials Before and After the OPS Price Freeze Took Effect in February, 1 9 5 1 ................ 104 Consumers1 Price Index— U.S. Averages by Groups of Commodities ..................... 106 Consumers1 Price Index— U.S. Averages by Groups of Commodities ..................... 107 CHAPTER I INTRODUCTION For the third time within a little more than a generation, the American people have been confronted with government restrictions in the form of controls over labor, prices and wages. Prior to the outbreak of World War I, regulations that tend to channel the economy were almost i unheard of in this country. Such has not always been true ! of major European countries, for example, France, Germany, ! i i Great Britain and Italy. These countries recognized long ago that economic controls were necessary during periods of economic stress, such as total war. Consequently, in the past they have attempted to control prices to a varying i degree from time to time. Rising prices of consumer commodities, shortages in j civilian goods, increases in rents and the cost of real | i property, and other disturbances in the peacetime economy have long been known to be an accompaniment of full scale j war. When the latter occurs, restrictions by government under its war powers on labor, prices, and wages are often instrumental to national survival. I The transitional adjustments from a full peacetime to a total war do not come cheap, ^An enormous expenditure occurs in both money and manpower. A shift from the pro duction of consumer goods to war equipment often involves considerable financial outlay during the transitional' period. Likewise, industries already producing war goods are required to accelerate their production to full capa city and this is often accompanied by a corresponding increase in overhead costs which may or may not be equal to the Increment in production. Rationing is inevitably linked to price controls in full scale war. Both rationing and price controls require a huge administrative staff of paid workers. With price controls this was evident during the era of the Office of Price Administration, and was equally exemplified by the Office of Price Stabilization. t I In addition to these direct costs, there are numerous indirect ones that are overlooked by the proponents of price controls. Often also overlooked is the fact that such controls are only stop-gap procedures in a disturbed economy and at best are effective only over short periods of duration. As a rule they do not get down to the funda mental causes. Within the past twelve years, Americans have become accustomed to thinking of price controls in terras of the Office of Price Administration (OPA) and in terms of the___ 3 Office of Price Stabilization (OPS). The former had its inception in 1942 with the passage of the Emergency Control Act, and the latter in 1950 under the Defense Production Act. The prices of commodities are intimately associated with wages. As prices rise, there is usually a correspond ing rise in wages, thus constituting the so-called price- wage spiral. I. THE PROBLEM Statement of the Problem 1 I The aim of the study is sixfold and is as follows: j j (1) to show the factors which necessitated price controls; (2) to compare the legislation which authorized the forma tion of the OPA and the OPS; (3) to compare the enforcement powers of the OPA and the OPS; (4) to illustrate the total costs of the OPA and the OPS; (5) to evaluate the effective ness of price controls; and (6) to determine whether a direct price control program is more effective than a fiscaT- monetary policy. j | ! | Importance of the Study j I Numerous periodicals, pamphlets, articles, and { bulletins have been published by former governmental _of f icials_to_sho.w_that_OPA_and_QP.S_wer.e_effeative__in________ 4 causing prices to hold the line. These proponents of price controls have used index numbers to show that commodities subjected to price controls were rigidly held in check, while other commodities not under control soared until they were also brought under regulations. In some instances, it appears as if the data were carefully chosen to substan- I tiate these views. Such a suggestion is supported by the following facts: (l) prices of many commodities under pricing regulations showed a rise in costs between 1942 and 1952; (2) index numbers indicate wages were not stable under either price control program; (3) cost of living i indexes for moderate income families of large cities indi cate prices rose all along the line between 1942 and 1952; ; i (4) where prices of commodities remained fairly stable, i I supply and demand operated to prevent exorbitant prices; and (5) direct price controls may not necessarily be the better methods to reduce inflationary tendencies. Many controversial questions arose at the beginning ] i of OPA and OPS, and especially the latter, since the j country was not at total war. Foremost among these were (1) whether or not price controls were absolutely necessary; l (2) how much power should the central government be given over the economy; (3) how would the regulations be carried i out by the government; (4) what would be the cost of the I program; and (5) should fisc.al=monetary__pol icy_.be___________ 5 substituted for direct price controls. Many persons remem bering controls of the bleak days of the World War I period were flatly against government intervention into the economy. Other persons were equally insistent that such a program was absolutely necessary for successful mobiliza tion. These questions were never satisfactorily answered. Even now disagreement exists as to the relative value of direct price controls. Therefore, it appears that a study i of price regulations of the past decade in the United States would be justified for the following reasons: (l) it would serve to evaluate the effectiveness of direct price i controls; (2) it would lead to an understanding of the j impact of price regulations on the economy; (3) it would be I I of some importance as an indication of some problems that are inherent in a controlled economy; and (4) it would serve as a basis for comparison between direct price con trols and a fiscal-monetary policy of controls. I II. ORGANIZATION OP THE THESIS .•*V! The following is a discussion, chapter by chapter, of the remainder of the thesis. Chapter II is a presenta tion of some of the factors arising between the years 1942 i and 1952 that contributed to the rise of price controls in the United States. Emphasis has been placed on the many facets of the economy that converge during a mobilization economy and increase the demands for a price stabilization program. Chapter III is concerned with the Congressional authorization of price control regulations in 1942 and again in 1950. Wherever possible, the exact wording of the legislation creating the Office of Price Administration and the Office of Price Stabilization has been used. This has been done principally to show that the wording of the I legislation that created these agencies is quite similar. j Moreover, this procedure facilitates an understanding of I ( the similarities and differences of these two agencies in j organization, powers, and other relationships. j l Chapter IV is primarily concerned with the ability ! and the inability of the Office of Price Stabilization and the Office of Price Administration to hold the line in | i prices and wages. Statistical data are offered to answer the question: Are price controls effective in stabilizing the economy during periods of mobilization? Several illustrations are presented to show the numerous methods by which direct price controls cam be and were circumvented. Chapter V is concerned with the economics of price controls. Data are presented to show direct price controls 7 are costly in money, manpower, and the effects they have on the economy. Chapter VI stresses the logic of the arguments for direct controls as opposed to a fiscal-monetary policy. The relative merits of these two policies are given. Some attention has been given to the advantages and the disad vantages of a policy that involves a combination of direct price controls with one of fiscal-monetary policy. Chapter VII embodies the summary and conclusions of the study. The salient points of each chapter of the thesis are presented in the summary. Conclusions are drawn; i as to the relative merits of a direct price control system ! as opposed to a fiscal-monetary system during periods of j economic stress. j III. SOURCES OF DATA ' | i It would be expected that most of the available J material is on the OPA. There are three important reasons | i for this, namely, (l) the OPA functioned throughout all ; ! periods in passing from a full peace time economy to a total war economy; (2) the OPS functioned only during the initial stage of the transition; full mobilization was not reached; and (3) with the dissolution of the OPA much of the recorded information was released and evaluated. 8 Similar information has not been compiled and released for the OPS. In spite of these facts, however, considerable information on the OPS has been ferreted out of a number of resources such as books, periodical articles, United States Law Weekly, OPS Communications, newspapers, consultations, and various other sources which furnish the basis of the material presented in this study. 1 CHAPTER II ECONOMIC DISTURBANCES IN MOBILIZATION Price controls develop during national emergencies. Such emergencies can be classified into two categories, namely: (l) during periods of rapidly expanding mobiliza tion ; and (2) during periods of total war. The actual necessity for such controls is due to (a) inflationary pressures; (b) to the increase in consumer buying power; jand (c) to the increased conversion of raw materials from the production of consumer goods to war materials, which results in a decrease in the supply of the former. I. INFLATIONARY PRESSURES Rapidly expanding mobilization and full scale wars are always accompanied by the generation of very serious inflationary pressures. Such a condition is due to both ! i the government and the consumer. Lester V. H. Chandler and Donald H. Wallace, Economic Mobilization and Stabilization (New York: Henry jHolt Company, 1951), P• 15* Factors Causing Inflation The requirements of the government are always tre mendous. Invariably, these requirements surpass the output of the producers of both raw materials and of the finished products, and especially of the latter. The sudden increase in government requirements is generally accompanied by fears of increases in prices of obtainable goods and by fears of shortages of essential goods. This phobia is shared by business firms and consumers alike. These anti cipations result in a sudden demand on the market for both materials and labor. Therefore, since the sudden demand is i greater than the supply of goods, the prices of materials and labor spiral in pyramid fashion. Money expansion and bank credit.— A major source of inflationary pressure is due to the creation of bank credit ; or due to the printing of money. Although these are very important causes, there are several others equally as fun damental. One of these is the expansion of money and I credit which attends the financing of war or of a defense \ i production program. However, the rise in specific prices may be attributed to other factors. Some of these affect 2! specific products; others are more general in their impact. ] 2 Jules Backman, War and Defense Economics (New York: -Rhinehar-t~and-Company-,—Ine-.-,— 195i-)-,—P •—223 •------------- ---- 11 Some of the money which is spent by the government for armaments and for the enlargement of the government staff is secured by borrowing from banks, who manufacture the necessary credit, thus causing an increase in the total \ purchasing power. The spending of these funds inevitably leads to pressure for higher prices. Such pressure is not so great when the economy has idle resources to draw upon to meet the increased demand, but once full scale employ ment is reached, it soon makes itself felt. Anticipatory buying and speculation.— The expecta tion of higher prices leads to a great deal of speculation 1 and this is not confined to the commodity exchanges. The | industrial concerns and the retailers engage in overbuying. I g . i This practice exerts a twofold increase on prices: (1) it increases demands; and (2) it results in the withholding of products from the market until there are increases in i 3 prices. Anticipatory buying was illustrated by the rush of housewives to the market to buy sugar, nylon hosiery and other commodities during the outbreak of World War II. The "run” on the sugar market was made in spite of an abundance of the product in this country. The cause of this action ^Ibid., pp. 225-2 6. 12 was traceable directly to the experience of the public relative to sugar in World War I when the intense demand of the government for sugar necessitated restrictions on the hoarding of sugar. The reduction of overseas shipments.— If the sup- I plies are from a belligerent country and these cannot be replaced, the ensuing shortages lead to higher prices. This is vividly illustrated by the shortages in a medicinal * substance, namely, quinine, during World War II. The supply of the drug from Malay was cut off, consequently it became scarce and the price of it was raised in this i country. ! I ! ( Transportation problems.— Supplies that come from overseas may be curtailed because of inadequate shipping ! 4 ! facilities. For example, ships may not be available to transport materials that are abundant in one country to a j country where they are less plentiful. This was seen in jthe case of cocoa in 19^1. It was plentiful in Africa but |no ships were available to transport it to the United ; i States. Consequently, the price of cocoa increased and ( this was true for some products from Hawaii that were J i plentiful but there were few available ships.to bring thesej - j Ibid.. p. 227. 13 products to the United States. The problem of transport of gasolihe and other petroleum products from the middle and far west to the east coast of the United States was due to the diversion of shipping facilities (tankers) to the war effort rather than a shortage of these products. i The absolute price of imported items.— The absolute increases in the prices of imported items are due to the increase in insurance rates, the increase in time to reach ports and unload, longer shipping lanes because of the more distant sources of supply, the desire to avoid dangerous routes, and to increased salaries to compensate for the 5 1 increased dangers. j i J j Government policies to aid specific groups.— The J 1 i jsteps taken by the Government to raise the prices of agri- | cultural products illustrate this point. As a result of high loans on selected farm products, a reluctance to release accumulated surpluses, a continuation of production * controls, and other measures, the prices of these products have been held up despite the absence of shortages in many •cases. i Supply and demand.— A theoretical factor that plays 5Ibid., p. 2 2 8. an important role In contributing to inflation is that the law of supply and demand does not hold during war or during periods of rapidly expanding mobilization. As a result of scarcity, the prices of some products soar to high propor tions. This spiraling of prices is theoretically traceable to supply and demand; not being equal. At least one impor tant cause of supply and demand not being equal is due to the large increase in government buying. As a result of the increased governmental buying power, the general public fears shortages and are willing to buy; consequently, a strong sellers' market develops. II. INCREMENT IN CONSUMER INCOMES The Labor Force During war or during preparation for defense a con siderable increase occurs in private incomes. The unem ployed suddenly become full time workers, the retired come out of retirement and become full time workers, the serv ices of young people of high school and college ages and the aged are in demand, and women who previously had been {unemployed become employees. In addition to this sudden t iinflux of workers, overtime pay becomes commonplace. Furthermore, many workers go from civilian to war indus tries. This shift is due to war industries offering more 15 attractive employment in the form of overtime pay than is possible in nonwar industries. The spread between straight hourly rates in war and nonwar industries rose from 19 cents in January 1939 to 26 cents in January 1944. The increased proportion of workers earning war industry rates plus an added 7 cents an hour in war industry (the increase in the differential), would have raised the average straight-line hourly earnings for all manufacturing industries from the 1939 level of 62.5 cents to 71*6 cents.^ Not only do the workers1 incomes increase, but likewise the profits of . 1 businesses increase. These are subsequently converted intoj dividends that ultimately increase private incomes. The spending of these funds invariably leads to the pressure I for higher prices. Only when resources are sufficiently j high or when inventories and production are equal to !demand, are prices held in natural cheek under these condi- i tions. Once these are used up, price rises begin. In addition to the war boom making wage earners of the unemployed, a consumer money increase occurs among the previously employed. Inevitably the latter category of workers receives an increase in wages. In almost all j ^E. C. Bratt and C. H. Danhof, 1 1 Components of War time Wage Change. ' 1 Survey of Current Business. XXIV: 18 (September, 1944). ^Loc. pit♦ 16 Industries the rise in labor costs soon makes itself felt. Labor is frequently the most important of the cost parti culars and whenever this increase occurs, it is usually passed on to the consumer. Perhaps the only exception is when such added labor costs lower the overhead per unit costs due to a rapidly expanding volume. Between 1940 and 1943, millions of persons trans ferred from peacetime to wartime Jobs, and the geographic movements of workers and their families assumed vast pro portions. This mass movement of workers from nonwar to war Jobs was stimulated by the much higher earnings in war industries and, in the case of men eighteen to thirty-eight, by Selective Service pressures. The number of unemployed stood at about 9 million in ; | July 1940, but it fell to 780,000 in September 1943- The j i number of women in the labor force, estimated at 1 3 .8 million in July 1940, reached a peak of 18.7 million in Q July 1943. The number of young people in the labor force had also increased markedly. In the fall of 1943, everyone who was willing to take a Job was at work. During the fall j of 1943, the Civil Service Commission conducted a house to house campaign recruiting workers, but this yielded ®Lester V. H. Chandler and Donald H. Wallace, Economic Mobilization and Stabilization (New York: Henry Hol-c uompany, . pTT3oT ~___ _____________________ 17 negligible results.^ More than 7 million persons above the estimated normal had entered the labor force. 10 Another illustration may be used to show the increase in consumer incomes. In munitions factories the average weekly work hours increased from 37*3 in May 1940 to 45.3 in May 1943. This represented a general increase from a scheduled work-week of forty hours in 1940 to 48 hours in 1943. In shipbuilding and certain other war industries, a work-week of sixty hours was not uncommon. 11 1 As indicated above, the increase in the number of workers meant a rise in consumer money incomes. This rise in incomes occurred in the face of falling supplies of consumer goods for which the private incomes were to be spent. This brought about excessive demand, or spending, and caused prices to spiral. Consequently, it was a direct contributing factor to inflationary pressures which neces sitated price control legislation. ^Chandler and Wallace, loc♦ cit. 10Lloyd W. Mints, "Monetary Policy and Stabiliza tion," American Economic Review. 41:188 (May, 1 9 5 1). _______ 1 Chandler, and Wallace, loc ._oit.________________ 18 III. WAR GOODS PRODUCTION VS. CONSUMER GOODS Military Demands War goods compete with civilian goods for many raw i p materials, especially the metals. A typical example of the latter is aluminum which the military forces use in huge quantities. The demand for many such products is high; for other products it is considerably lower. As the war demand expands, bottlenecks develop and the quantity of raw materials, skilled labor machine goods, and so forth, available for civilian goods is reduced. Such durable consumer goods as automobiles, housing, and electrical appliances are particularly affected by the-se shortages. The civilian economy must release the resources that , I the war economy needs, thus giving the right-of-way to the (expanding defense program. The war economy requires chemicals, fibers and metals. Civilian industry must either get along without these resources or replace them. The latter is exemplified by hundreds of changes in the civilian jeconomy. For example, our supply of natural rubber was cut off from the' East and this led ultimately to the rationing of automobile tires in 19^2. Civilians had to either use 12 Backraan, o£. cit., p. 226. recapped tires or get along without them. The large quan tities of gasoline required by the military throughout the past war period was accompanied by a corresponding reduc tion in civilian supplies. During the peak production of planes (75,000 annually during the latter part of World War II) and also during the peak production of all other military transport vehicles, tanks, trucks, etc., a neces sary reduction in production occurred in automobiles and trucks for civilian use. Not only did these vehicles become scarce, but frequently parts required to keep those already owned by the populace in running order were lack ing. Actually two separate but not independent factors i were in operation that caused this condition. In the first j place, factories were converted from the development of civilian to the production of war transport facilities. Second, the materials used for production of civilian pro ducts were the same as required by the military. Consumer Shortages I The shortages generated in consumer goods during | total war are not always due to direct competition between the production of war and consumer goods. Many remote factors operate to produce these shortages. For example, j certain canned products were unavailable to civilians during World War II. Many fruits and vegetables were plentiful 20 but were not available to the general public. This short age was generated because of military demands for tin and glass and not due to the scarcity of the products in this country. Oil shortages were due primarily to transport problems. Many oil tankers fell victims to submarine attacks by the enemy. Tank cars were used to transport liquid oil products for the military. Transcontinental oil lines were not plentiful before 1940. Those that were in operation frequently found themselves without sufficient manpower for operation. ► The consumer felt the resulting pinch. Thus the shortage which developed was not due to a shortage of oil or oil products in the country, nor was it due to competition between the military and civilians for the same finished products. Clothing and textile goods were required by both the military and civilians. Here competition developed for the raw materials used in these products. Throughout the second World War, nylon hosiery for civilians was extremely limited. This developed because of the large quantities of nylon used by the government for making parachutes. Housing.— The shortages that developed in civilian housing were not due entirely to competition between mili tary and civilian requirements for lumber. Many other factors were involved. One of these was the mass internal migration of people from rural to urban areas, and from one urban area to another. Between 1940 and 1948 three million persons migrated to the west coast. These persons together with higher birth rates caused population increases in Oregon, California and Washington. Abnormal growths also occurred in New Jersey, Michigan, Ohio, Florida, Virginia, I-? Connecticut and Maryland. J Another cause of the housing shortage was the sudden increment in marriages. In 1940, only 53*3 per cent of the young women of ages 20 to 24 were married, and only 74.1 per cent of the young women aged 25 to 29 were married, the corresponding percentages for 1949 were 62.6 and 82.6 per cent."^ A third factor of some importance was the lack of labor available for civilian usage. During the early part of the 1940's, most of the carpenters, contractors, brick and rock workers transferred to jobs for companies holding government contracts. There fore they were not available for employment by private individuals not holding government contracts. A fourth cause of the housing shortage was as money became plentiful, two or more families that had previously occupied a single ■^Florence Peterson, Survey of Labor Economics (New York: Harper and Brothers, 1951)> P* 19* 14, 22 dwelling moved to separate units. The above illustrations serve to demonstrate how the military demands compete with those of the civilian. This competition may be direct or it may be subtle. Whether direct or indirect, its impact on the civilian economy is the same. CHAPTER III LEGISLATIVE AUTHORIZATION OP OPA AND OPS Whenever prices rise, people of fixed or limited j incomes^ and persons of low incomes are usually affected detrimentally. The rise in prices greatly reduces the purchasing power of these individuals and frequently causes a depletion of their savings, bonds, and insurance policies. jThe possibility always exists that inflation will develop to the point where money is virtually without value, govern-j ment credit can become weakened or even destroyed, and the final economic processes can become broken down. If such hyperinflation develops, then, during the downward adjust ment which follows, business firms may lose billions of j i dollars, farmers may lose money since they may have bought their f^.rms at high prices, and finally millions of persons may suffer because of their becoming unemployed. Because of these considerations, soon after the outbreak of World War II in Europe in 1939, the United States Government ! attempted to check the inflationary tendencies by control- * i ling prices on numerous materials. This was done through a succession of agencies which culminated in the Office of 2k Price Administration. I. THE BEGINNING OP OPA Predecessor Agencies Since the two predecessor agencies of the OPA, namely, the National Defense Advisory Commission, and the Office of Price Administration and Civilian Supply, had a direct influence on OPA, a brief discussion of these agencies may be of some interest. National Defense Advisory Commission.--President Franklin D. Roosevelt, acting under the Defense Production Act of 1916, announced on May 28, 19^0, the establishment of the National Defense Advisory Commission (NDAC) to the Council of National Defense. This seven member commission was composed of William Knudsen, in charge of Industrial Materials; Sidney Hillman, Labor; Ralph Budd, Transporta tion; Chester Davis, Agriculture; Harriet Elliott, Consumer Protection; and Leon Henderson, Price Stabilization. The j function of the commission was purely advisory. Each com- . ! missioner was to advise the President individually, except ! , i that the commission would meet weekly to discuss mutual defense problems. The National Defense Advisory Commission never 25 functioned as it was originally conceived. Its members were too influential to act in a purely advisory capacity. Knudsen from the very beginning tried to influence the manufacturers on the defense program; Stettinius, Secretary of State, studied requirements, but also engineered the buying of raw materials; and Hillman arbitrated labor dis putes.^" In addition price schedules were issued by Henderson, who had no power to carry them out. Finally, after a somewhat unstable and stormy existence, the NDAC was abolished on April 11, 194l. j i I Office of Price Administration and Civilian Supply.— j President Roosevelt on April 11, 19^1 by Executive Order j 873^ established the Office of Price Administration and ; Civilian Supply (OPACS). This was the successor agency of NDAC and the immediate forerunner of OPA. Leon Henderson was appointed as the Administrator and in direct charge of ! 1 its Consumer Division; David Ginsberg headed the legal Division; J. Kenneth Galbraith, the Price Division; and the Civilian Allocation Division was headed by Joseph L. ♦ Weiner, another Associate Administrator. The President ! 1 i ^John A. Hart, The Beginning of OPA; Part II. The Price Stabilization Division, Historical Reports on War Administration, Office of Temporary Controls, Office of Price Administration. (Washington, D.C.: United States Government Printing Office, 19^7), P* 133* : 26 transferred on August 28, 1941 Weiner's Division and his entire staff to the Office of Production Management (OPM). OPACS was created to serve a dual function. In the first place, it was to direct price controls. Second, its purpose was to function in establishing an easy movement and an equal distribution of civilian goods. This latter function is commonly referred to as rationing. OPACS was a much stronger agency than MDAC. The Administrator of OPACS was given authority to publish from time to time such maximum prices after investigation as he deemed fair and just. In addition to this, he could recom- J mend to the President the use of powers in the latter1s hand to enforce his published price schedules. As indirect and makeshift as price controls and regulations may appear to have been, William Jerome Wilson believed that the sys- p tem worked in many cases. Since it was not subjected to a court test, he stated that we shall never be quite sure whether it was a lawful exercise of authority or a usurpa tion. The probabilities were in its favor. ! 1 ICreation of the Office of Price Administration Executive order 8875 issued August 2 8, 1941, gave | 2William Jerome Wilson, The Beginning of OPA: Part _I. The Price Control Act of 1942, Office of Temporary Controls, .Office of Price Administration. (Washington, D.C.: United States Government Printing Office, 1947), p. 44.________ 2? rise to the Office of Price Administration with Leon Henderson as the Director. It was at this time that the President transferred the civilian Allocation Division to OPM. The Blue Print for Victory January 6, 1942, the President issued his famous blue print for victory. It was a stepped up program of rearmament. For example, his blue print called for 60,000 planes, 45,000 tanks, 2 0 ,0 0 0 antiaircraft guns, and 8,000,000 tons of shipping for 1942. These figures were to be increased the following year. In fact, at least 50 per cent of the production of the United States was to be devoted to the war effort. This program as outlined by the President paved the way for the passage of the Emergency Control Act of 1942. II. EMERGENCY CONTROL ACT On January 30, the President signed the Emergency Control Act of 1942 and for the first time, OPA was given undisputed statutory powers, defining its duties to control prices and rents, providing means for it to handle vio lators, and limiting its authority in certain fields. The principal purposes of the act were: (l) stabil- ization of prices: (2) protection of defense appropriations 28 against dissipation by excessive prices; (3) protection of persons having fixed incomes against undue impairment of their standard of living; (4) securing of adequate produc tion of commodities and facilities; and (5) the prevention of post-war collapse of values. Summary of the Act The following is a compilation of the summary of the provisions of the act. Establishment of maximum prices.--The Price Adminis trator was authorized to establish such maximum prices for commodities as would be generally fair and equitable and t would effectuate the purposes of the act. These were the j i principal standards established for the Administrator’s j guidance. In addition, however, when establishing a maxi- j mum price the Administrator was directed to ascertain and consider the prices prevailing between October 1, .and October 15, 194l; and adjust such prices for such relevant factors as he determined to be of general applicability. Certain of these factors were specified for his guidance. The Administrator was also, so far as practicable, to • ^United States Office of Price Administration Quar terly Report, January-March, 1942 (Washington, D.C.: United< States Government Printing Office), pp. 20-22. 29 advise and consult with representative members of the industry to be affected by the regulation. In order that emergency situations would be effec tively met, the Administrator was authorized to "freeze1 1 prices, for not more than 60 days, without extensive pre liminary investigation. These temporary regulations, how- ever, could be replaced by permanent ones. Control of prices of agricultural commodities.— Special limitations were imposed upon the administrator's i powers with respect to agricultural commodities. The power | to establish prices for agricultural commodities could not ! be exercised until the price of such agricultural commodi- ® / X 1 ties had reached the highest of the following prices: (1) 110 per cent of the parity price (or comparable price in certain cases) of such commodity; (2) the market price pre vailing for a commodity on October 1, 1941; (3) the market ! price prevailing for a commodity on December 15, 1941; or (4) the average price for a commodity during the period | July 1, 1919 to June 30, 1 9 2 9. The prices of derivative commodities had also to be sufficiently high to return to the producer of the primary commodity a price equal to the United States Office of Price Administration Quar terly Report, loc. cit. 30 highest of the enumerated prices. No price for an agri cultural commodity could he fixed in any event without the prior approval of the Secretary of Agriculture.^ Buying and selling commodities.— The Administrator could buy, sell, store, or use any commodities in order to maintain the maximum necessary production. He could also make subsidy payments to domestic producers. Strategic or critical materials could be bought and sold only by the f l Reconstruction Finance Corporation. Price schedules already issued.— Maximum prices established under executive order were expressly continued | *7 ! in force by the act.' Rent control.— The Administrator established maximum rents for housing accommodations in defense rental areas (i.e. areas in which defense activities had resulted or threatened to result in ah increase in the rents for housing i accommodations inconsistent with the purpose of the act). Before establishing maximum rents, the Administrator had to declare the necessity for such action and to make I I ^United States Office of Price Administration Quar terly Report, loc. cit. Loc. cit. 7 'Loc. cit. 31 recommendations. If appropriate action had not been taken by State or local bodies within 60 days, the Administrator Q could take steps to make the recommendations effective. Administration: Office of Price Administration.— The act established an Office of Price Administration under the direction of a Price Administrator. The Administrator , was appointed by the President by and with the advice and consent of the Senate and received compensation of $12,000 9 per year. 1 7 Transfer of duties.— The President could transfer j » from the Office of Price Administration any of the powers j and functions conferred upon it with regards to a particular commodity to any other department or agency of the govern- j ment having other functions relating to such commodity or commodities. The President also was empowered to transfer 1 i to the office any of the powers and functions relating to priorities or rationing conferred upon any other department or agency of the government with respect to agricultural i commodities except the normal powers of the Department of ! i 10 iAgriculture. Q United States Office of Price Adm ini s tr at i on Quar- ; terly Report, loc. cit. ^Loc. cit. 10Loc. cit. 32 Opportunity for protest afforded. Within a limited time, protest could he filed against the provisions of any price or*rent maximum regulation. If a protest was denied, the protestant had to be informed of the grounds upon which such denial was based. The protest proceedings could be limited to the filing of written evidence. 11 i i Judicial review of maximum price and rent regula tions.— The act established a special court to be known as the Emergency Court of Appeals. Its members were to be i designated for service by the Chief Justice of the United ’ i States from sitting judges of the district courts and the j i circuit courts of appeal. The regulations of the Adminis- 1 trator could be set aside if not in accordance with law or i I if his decisions were shown to be arbitrary or capricious. This Emergency Court of Appeals was given exclusive I jurisdiction to review regulations or orders issued by the Administrator. No other court could consider their valid- 12 ity. Review by the Supreme Court.— Determination by the Emergency Court of Appeals was made subject to review by the Supreme Court upon presentation of certiorari in the 1:LIbid., p. 22. i p cLoc. cit. 33 same manner as determinations by the circuit courts of appeal.1^ Prohibitions and enforcement.— The act made it unlawful, regardless of existing contracts or agreements, for sellers or buyers in the course of trade or business to violate any maximum price or rent regulation issued by the Administrator. Pour principal methods of enforcement were provided: 1. Criminal proceedings. Persons wilfully commit- l ting any prohibited acts were to be subjected to a fine of I not more than $5,000 or to imprisonment for not more than ' i one year or to both such fine and imprisonment. I I 2. Injunctions and compliance orders. Violators i could be enjoined or compliance with the Administrator's regulations or orders could be ordered by the Federal Dis- i trict Courts and State Territorial Courts. 1 3. Licensing. The Administrator could license any person (with the exception of certain industries) subject I to any maximum price or rent regulation as a condition of j j selling any commodity or service to which the regulation 13 United States Office of Price Administration Quar terly Report, loc. cit. ! 34 was applicable. The license could be suspended by any State or Territorial Court and in certain cases by Federal District Courts upon petition of the Administrator, providec that there had been a previous violation, that there had been a warning notice received by the licensee from the Administrator, and that there had been a violation subse quent to the receipt of such warning notice. Licenses could be suspended for a period of no more than 12 months. 4. Treble damages. Suits for treble damages could be brought by any purchaser for use or consumption other t | than in the course of trade and business. If the buyer was | jnot such a person, the treble damage suit could be brought by the Administrator. This provision did not become effec- j tive for 6 months.^ i III. PRICE STABILIZATION PROGRAM OF 1950 ! Authorization of Office of Price Stabilization Following the outbreak of the Korean War, the President was given the power by Congress on September 1, ! 1950, to impose a general ceiling on the prices of individ ual goods. In the industries where prices were fixed on materials, wages had to be stabilized also. The act, J 1 1^United States Office of Price Administration Quar- ~t enly—Rep or_t,__l oc.. „c i.t. _______________________________________ 35 however, did not include rents, professional services, and publicly regulated utility rates. Agricultural prices could not be fixed lower than parity or the level existing from May 24, 1950 to June 25, 1950. The act provided for the creation of an Economic Stabilization Agency with two main divisions: the Office of Price Stabilization, and a Wage Stabilization Board. On January 26, 1951, a General Price Ceiling Regulation was issued, freezing all prices except those received by farmers, and these were frozen at the highest level of the previous five week period. At the same time, all wages were frozen in covered industries at the rates prevailing on January 21, 1951- Statement of policy.— The policy of the United States was to: (l) oppose acts of aggression; (2) promote peace and insure peaceful settlement of differences through action of the United Nations; and (3) insure respect for world law. To that end, the government was pledged to support the collective action of the United Nations in conformity with the charter of the United Nations. The United States was determined to maintain whatever economic and military strength that was necessary to carry out this / purpose. Therefore, it was necessary to transfer certain materials and facilities from consumer to military use. This required expansion of productive capacity. In order 36 that this diversion and expansion could proceed immediately and with maximum effectiveness, the normal civilian pro- T f t duction was to be curtailed and redirected. ^ Aims of the Act. The objectives of the Act were to: (1) provide the President with power to carry out these regulations in the economyj (2) use the powers of the Act to promote national defense by meeting immediately and effectively the requirements of the military in support of national security and to obtain objectives of the foreign policy; and (3) use the powers of the Act to prevent undue pressures on prices and wages, and as far as practicable work within the framework of the American system of competi- tive enterprise in prices, distribution and production of materials for civilian use. Duties of the chief executive.— The President was authorized (l) to require under contracts or orders (other than employment) which he considered necessary to promote national defense take priority over any other contract or order; or require acceptance of contracts and orders take priority over any contract or order of any other person; (2) to allocate materials and facilities as he considered - ^United States Code Annotated Title 50» War and National Defense Emergency and Post War Legislation (St. Paul: West Publishing Co.j, p. 312.__________________________ 37 necessary to promote national defense. These extraordinar ily potent peacetime powers extended to President Truman during his program of "Police Action" in Korea were unprece dented in the annals of American History. Delegation of executive powers.— The functions con ferred upon the President by the Defense Production Act of ; 1950 were delegated as follows: 1. The powers delegated to the Secretary of Interior were those with respect to solid fuels, gas, petroleum and electric power. i i 2. The powers delegated to the Secretary of Agri culture were those with respect to food and those concerned with the domestic distribution of farm equipment and com mercial fertilizer. 1 3. The powers delegated to the Commissioner of the Interstate Commerce Commission were those concerned with domestic transportation, storage, and port facilities, 1 but, excluded were those with respect to air transport, coastal, intercoastal, and overseas shipping. Hoarding.— Hoarding was forbidden by the Act. Hoarding was defined as: (1) the accumulation of materials ; in excess of the reasonable demands of business, personal, or home consumption, or (2) the accumulation of materials 38 for the purpose of resale at prices that were in excess of the prevailing market prices, and materials that the President had previously designated as scarce materials or materials of which the accumulation would threaten the supply. The President was required to publish in the Federal Register, and in such other places that he deemed appropriate, all the materials that were unlawful to hoard. Also, the President was required to publish lists of materials which were withdrawn. t Penalties for violation.— Any person who wilfully violated, or failed to perform any regulation of this sec tion of the Act was upon conviction, to be fined not more I than $10,000 or imprisoned for not more than one year, or both. Price and wage stabilization.— The purpose of Congress was to provide the authority necessary to achieve the following purposes so that the national defense could be promoted: (l) to prevent inflation and preserve the value of the national currency; (2) assure that defense I appropriations were not dissipated by excessive costs and prices; (3) stabilize the cost of living for workers and other consumers and the cost of production for farmers and businessmen; (4) eliminate and prevent profiteering, 39 hoarding, manipulation, speculation, and other disruptive practices resulting from abnormal market conditions or scarcities; (5) protect consumers, wage earners, investors and persons with fixed or limited incomes from undue impair ment of their living standards; (6) prevent economic dis turbances, labor disputes, interferences with effective mobilization of national resources; (7) assist in maintain ing a reasonable balance between purchasing power and the supply of consumer goods and services; (8) protect the t \ national economy against future loss of needed purchasing power by the dissipation of individual savings; and (9) to jprevent a future collapse of values. i Voluntary compliance.— The Act authorized the I President to encourage, and to promote voluntary action by j business, agriculture, labor and consumers to carry out price ceilings and stabilization of wages when they were imposed. Failing in this, measures were provided for i forced compliance of regulations. I Forced compliance.— The President could issue regu lations and orders establishing a ceiling or ceilings on the price of materials and services as provided by the j Act. This action could be taken either with respect to individual materials and services or to individual types of employment. The President was permitted to establish a ceiling price only when he found that: (1) the price of materials and services had risen or threatened to rise substantially above the base period (May 24, 1950 to June 24, 1 9 5 0); (2) when such price increases affected the defense effort; (3) when such ceilings were necessary and I practicable; and (4) when such ceilings were fair and 17 equitable to both consumer and seller. ' Whenever the President established ceilings on materials and services, the Act made it mandatory that he also stabilize wages, salaries and other compensations in the covered industries producing the materials and serv- ; t ices. 1 Ceilings for agricultural products.— Ceilings were not to be established or maintained for any agricultural product except: (l) when the parity price for such commodity as determined by the Secretary of Agriculture in accordance with the Agricultural Act of 1938* or, the highest price i paid during the base period (May 24, 1950 to June 24, 1 9 5 0); if no active market existed for the product during 1 the base period, the average price used was the one that j prevailed prior to May 24, 1950 in which there was an ^Ibid., p. 335. 41 active market for the product. The President could from time to time adjust such ceilings to make equitable allowances for such things as substantial reductions in crop yields, substantial increases in cost of farm production, and other hazards that result in production and marketing of farm commodities. The Act expressed that nothing contained in this section was to supercede either the provisions of the Agricultural Act of 1949, or the Agricultural Act of 1937* Power to establish controls and rationing.— The President was given the power to impose price controls over j a substantial portion of the national economy. The controlsj were to be established at the retail level of consumer goods! for personal and household use. If the President found it necessary, he was also empowered to ration goods at the retail level of consumer goods. ; If any person was found guilty of violation of this section, the President was authorized to prescribe the amount of payment that was to be paid by the violator. In this, the President’s power was absolute, that is, his Jurisdiction in such cases superceded those of any other executive departments or governmental agencies. Right to protest regulations.— If a regulation passed 42 that was objectionable to affected persons, any of these persons could file protests against the regulation within six months after the effective date of the regulation, or could file protests after the effective date if new grounds arose. All protests were to be filed in accord 1 with methods as set forth by the President. The objections! were to be accompanied by affidavits or other written evi dence in support of the objections. The law required the President to either grant or deny the protests within a reasonable time after filing. If the protests were denied j in part or completely, the President was to inform the j protestant on the grounds on which he based his decision. I i Court jurisdiction after denial of protests.— If the I protest was denied in part or completely, the protestant could appeal within thirty days to the Emergency Court of ! Appeals requesting that the President’s decision be set | aside. If the Emergency Court of Appeals refused to support * the protestant, within thirty days after the judgment of the Emergency Court of Appeals, the protestant could file a petition in the Supreme Court of the United States request ing the latter court to review the case. Request of injunctions by the President.— The i President could apply to the court for an injunction I ^3 whenever anyone was engaged In, or about to be engaged in violations of this section (dealing with price and wage controls, and rationing) of the Act. The President could request either temporary or permanent injunction restrain ing orders, which were granted without bond. Criminal penalties for violation of the section on wage and price controls and rationing.— Any person found guilty of violation of this section was subject to a fine of not more than $10,000, or not more than one year ! imprisonment or both. Recovery of overcharges by buyer or the United States.— If goods and services were bought in excess of thej I prescribed ceiling or ceilings, the buyer of such materials and services could within one year from the date of the purchase file action against the seller for the overcharge, j i The seller was held responsible for a reasonable attorney's fee and cost as determined by the court plus (l) three times the amount of the overcharge, or (2) an amount of i $25 and not more than $50, as determined by the court. The highest of these two amounts was the one that prevailed unless the defendant could prove that: (l) the violation was not sillful or (2) the violation was not the result of j i making practical precautions to prevent it. 44 Power to exercise consumer and real estate credit controls.— Consumer and real estate credit controls were to be exercised by the Board of Governors of the Federal Reserve System until-such time as the President determined that they were no longer necessary, and under no condition / longer than after the date of the termination of this section. The Act authorized the Board to: (l) require the down payment of not less than one-third, or require a maximum maturity of less than eighteen months on install ment credit for the purchase of new or used automobiles, or (2) require the down payment of fifteen per cent or , require a maximum maturity of less than eighteen months on installment credit for the purchase of household appli- J I ances (radios, televisions and phonographs), or (3) require a down payment of fifteen per cent or with installment fix a maximum maturity of less than eighteen months for the i purchase of household furniture and floor coverings, or ] (4) require a down payment of more than ten per cent or fix a maximum maturity of less than thirty-six months for repairs on residence (including alterations or improvements I * of residence). The down payments in (l), (2), and (3) could be made either in cash, trade-in or exchange propertyj or both. 45 Penalties for violation of consumer and real estate credit controls.— Any person that was found guilty of vio lation of any provision under this section of the Act was subject to a fine of not more than $5*000* or imprisonment of not more than one year, or both. Exclusions from the Act t Excluded from price controls by provisions of the Act were compensations received from several types of services, rentals on numerous articles, and rates charged by insurance companies. Professional services.— Rates not under control I ................. i , i were those charged for professional services, wages, j salaries and other compensation paid to physicians employed! in professional capacities by licensed hospitals, clinics and like medical institutions; wages, salaries and other compensation paid to attorneys licensed to practice law, j i those employed in a professional capacity by an attorney or firm of attorneys engaged in the practice of his or her profession. i i Publications.— Excluded from price controls were prices or rentals for (a) materials furnished for publica tion by any press association or feature service, or (b) books, magazines, motion pictures, periodicals, or 46 newspapers, other than waste or scrap; or rates charged by any person in the business of operating a radio-broadcast ing or television station, a motion-picture or other theater enterprise, or outdoor advertising facilities. Insurance rates.--Rates charged by any person in the business of selling or underwriting insurance were not subject to price regulations. Rates on public utilities.— Rates charged by any common carrier or other public utility were not controlled: provided that no common carrier increased its charges for J property or services sold by it for resale to the public, I for which application was filed after the date of issuance j I of such stabilization regulations and orders, before the | ] Federal, State or Municipal authority having jurisdiction to consider such increase, unless it first gave 30 days notice to the President or to such agency as he designated. | | i Personal services.— Prices charged and wages paid for services performed by barbers and beauticians were not under pricing regulations. j ( Rents in non-critical defense areas.— Prices or rentals and real property were excluded from controls except in areas that were defined as critical defense areas.; 47 Exemptions.— The President provided exemptions for materials or services or transactions in, or any type of employment, with respect to which he found (1) such exemp tion was necessary to promote national defense; or (2) it was necessary that ceilings he applicable to such materials or services, or that compensation for such types of employ ment be stabilized. I i IV. DEFENSE PRODUCTION ACT AMENDMENTS OF 1951 i The Capehart Amendment 1 I The Capehart Amendment had two principal provisions:[ i first, it prohibited rollbacks for producers or processors of nonagricultural commodities and services below (a) the \ !price prevailing just before issuance of the ceiling regu- J i lation, (b) the price prevailing during January 25 to 1 February 24, 1951, or (c) a price ’ ’based upon” the highest price between January 1, 1950 and June 24, 1950, adjusted for increases or decreases in all costs, direct and j indirect, occurring subsequent to the date on which such j l8 | highest price was received prior to July 26, 1951. i Second, it allowed every such seller to apply on an individual basis for adjustment of his ceiling prices to — — Code of Federal Regulations, p. 14. I 48 reflect the highest price as calculated in alternative 19 above. ^ Herlong Amendment The Herlong Amendment provided that no subsequent regulation ”shall deny to the seller of materials at retail or wholesale their customary percentage margins over cost of materials during the period May 24, 1950 to June 24, 20 1950.n The principal purpose of the amendment was to insure the customary pricing practices for wholesalers and retailers who price on a percentage markup or discount basis. Halleck Amendment The Halleck Amendment provided that a seller could collect his state or local gross income or receipts tax in 21 addition to his commodity ceiling price. V. COMPARISON OP THE ECONOMY UNDER OPA AND OPS Legal Phases The legislation that gave rise to OPA and OPS is - ^Code of Federal Regulations, p. 14. 20t Loc. ext. 21 Loc. cit.____________________________ _ , _ l remarkably similar. As a matter of fact, some parts are | I Identical. The right to protest regulations, the duties of the Emergency Court of Appeals, and the authority of the Supreme Court to review the findings of the Emergency Court of Appeals, and the treble damage clause under the Defense Production Act of 1950 were the same as those under the General Maximum Price Regulations of 19^2. Evasions Neither pricing agency was sufficiently strong to prevent various evasions from occurring. Much of this was I due to one of at least four important causes. In the first : I place, loopholes existed in the regulations that provided ! I methods of escaping the intent; second, the desire to have 1 t more of scarce commodities made black marketing profitable with only a minimum amount of risk; third, the enforcement division of each of .the pricing agencies was small in i number of agents per unit area; and fourth, the mass accumu lation of regulations, the technical terminology, and the t like led to inadvertant noncomformance. j I Price Adjustments Each agency was provided with a limited number of i provisions by which the price ceilings on commodities could be raised to compensate for all cost increases. The 50 pattern for these increases was originally formulated by the OPA regime. One secondary pricing guide used in case of multiple-product industry was the product standard. This i standard came into play, where in spite of a general over all earning position, the maximum price for a particular I one of the industry's products were in question. In such cases, the industry costs were examined to see whether the price resulted In an out-of- pocket loss to the producers in industry other than those on high-cost marginal fringe. If the cost was shown to have that effect, the agency estab lished price sufficient to cover out-of-pocket costs for the producer Just below the marginal fringe. Since costs vary so much between pro ducers, the application of the standard meant that the low cost producers received more than the cost. 22 ■ i Another secondary pricing standard was the industry earning standard. Under this provision, relief was not I i I allowed unless earnings dropped below that of peacetime. Under OPS, the agency was required to raise prices for an industry if and when its returns on the owner's investment, * before taxes, fell to 85 per cent of the level enjoyed three of the four best years, 1946 to 1 9 4 9 . The 1 Capehart Amendment authorized that the ceilings be raised i so that they would equal pre-Korean selling prices plus all i 22 Alfred Auerbach, OPA and Its Pricing Policies (New York: Fairchild Publishing Company, 1944), pT 5 8. ^^Loc. cit. 51 increases or decreases in costs up to July 25, 1951. As an indication that price adjustments were made, was the fact that ceiling price increases due to the Capehart Amendment jumped 56.2 million dollars in the two weeks p ii period prior to March 31» 1952. Taken together with the industry earning standard, the product earning standard meant that the maximum prices in multiple product industry were considered to be generally fair and equitable if the industry was: (l) receiving over-all earnings on its opera tions equalling or exceeding its peacetime earnings; and (2) are not except for the highest cost fringe of producers, incurring an out-of-pocket loss on any particular line product.25 The Freeze Technique The application and pattern of the freeze under OPS and OPA were alike. Prices were frozen in accordance with their highest level during a certain number of weeks prior to the issuance of the order. The freeze applied to all levels of merchandising, that is, manufacture, wholesale, and retail. All prices were frozen except for goods and services statutorily or administratively exempted, and excluding rents, which were controlled separately. - This meant that each store, and each class of commodity had its 24 Ellis Arnall, Price Stabilization Director: Advance Press Release, March 31, 1952. ^Auerbach, op. cit., p. 5 9* 52 I separate celling. Lists of all of these ceilings were to be posted in each store within a period of time as a guide to consumers. The posting of prices was not well enforced. Besides, the ceilings were gradually replaced for one product or group of products after another. Application of Price Ceilings The groundwork for establishing price ceilings under OPS was set forth by OPA, that is, OPS followed the same pattern of OPA. One of these was the ’ ’cost plus” method. As a rule, the agencies tended to give manufactured costs when profits over-all were abnormally high; total costs when they were not. Cost plus a profit was rare and usually not permitted only when over-all profits were subnormal. An unusual case occurred under OPA with the textile industry. Fred M. Vinson allowed textiles total costs plus a profit even when over-all earnings were substantially superior to pre war earnings. Prewar textile profits, however, were lower than the profits of the bulk of American industry either in percentage on sales, or in returns on invested capital.27 The Price Formula The price formula provided another method for deter mining the ceiling price for differentiated products. This method was vague, difficult to understand and enforce and 26 Persia Campbell, The Consumer Interest: A Study in Consumer Economics (New York: Harper and Brothers Publish ers, 1 9 4 9), P. 151. ^Auerbach, o j d . cit., p. 61. 53 frequently the seller was allowed automatically to pass on increased costs. Formula ceilings were popular because they offered the simplest approach to control markets with 28 much variation of products and costs. Dollar and Cents Ceilings The difficulty experienced in checking on ceilings i under formula pricing and General Maximum Price Regulations was one of the main reasons for the change from the "cost- plus mark up" to the dollar-and-cent basis which was first [worked out for a number of products, mostly food, a few ; i I j household items, customarily bought in grocery and meat j stores; it was also used on a few "low-end" textiles. I Community pricing.— Some dollar-and-eent ceilings j i were set at the national office, though prices differed by geographic zones as did the price of meats, others were set up at regional offices on a community basis, and came to be j known as community prices. These were calculated on the j basis of average costs, with an allowed wholesale and retail markup. For the most part small independents con stituted Class 1 and 2, chain stores Class 3* and super markets, large department store units and the like, Class i 28 Seymour E. Harris, The Economics of Mobilization and Inflation (New York: ¥. ¥. Norton and Company, Inc., L l - 9 5 - 1 - ) - , — P.—240---------------------------------- ----------- 4. Dollar-and-cent ceilings were differentiated by class of store, customary average differential being preserved, although in a number of cases the same price was fixed in Class 1 and 2; and another in Class 3 and 4 stores. Slightly lower ceilings were set for larger volume because they did not extend the traditional service of smaller stores.2^ Some problems of dollar-and-cents regulations.— No dollar-and-cent regulation, however, makes sense unless it j contains a quality standard or some other functional speci fications. Otherwise, what is being priced is not specifi cally defined and evasions of the intent of the control are j I simple matters to undertake.3® I i Attitude Toward Farmers Another likeness of OPA and OPS was manifested in j their dealings with the farm group. Under OPA, the farmers had opposed control over food prices, which had been low during the thirties, and they were powerful enough to. get a clause inserted prohibiting ceilings on food prices until they relfected 110 per cent of parity, or a level fixed by 29campbell, qjd. cit., p. 152. ^Auerbach, ojo. cit., p. 51* 55] alternative formulae as set out in the act.^1 This resulted in a rapid rise in food prices during the summer of 1942. Meanwhile, the "Little Steel Formula"^2 limited wage increases to 15 per cent of the January, 1941 level as a basis for wage control on the assumption that the cost 33 of living would be held steady. ^ With the passage of the Defense Production Act, the farmers again obtained security by identical routes as in 1942. The difference, however, was that parity was set at 105 per cent.J i Provisions for Subsidies 1 ■ i i Both agencies practiced subsidizing high cost out- I put where higher than ceiling prices were necessary in I I order to obtain the output of high cost firms or in order to obtain the marginal or high-cost output of efficient firms. Exemption of Some Commodities from Control ' Neither the OPA nor the OPS had all consumer commodij- ties under controls. In some instances these non-controllecl Q 1 J Campbell, op. cit., p. l8l. 32Lo c. cit. 33 Loc. cit. ^Time, 59:84 (January 14, 1952). 56' commodities showed sharp price increases. This is best exemplified in the case of a farm commodity, namely, watermelons. James F. Brownlee, Deputy Administrator in charge of pricing stated that in 1943 watermelons were exempt from price controls. Approximately 142,000 acres were planted. The price obtained for the crop was 87 per cent higher than in 1942 and 195 pei* cent of parity. In 1944, consequently, 220,000 acres were planted, an increase of 55 per cent.35 Naturally, this increase would be at the expense of other food products and would Involve i - many diversions. For example, diversions occurred in j land, fertilizer, farm equipment, gasoline, and transport ! in order to make possible a high level of production for j this so-called luxury itera.36 I Inflationary Course j The inflation that developed in 1950 followed the same pattern as that of 1941. The inflation of 1950 was not the result of military spending and deficit financing by the Federal Government. The immediate cause, rather, ; I 1 ! was the widespread deficit financing by consumers and 1 | firms, based on anticipation of shortages, inflation, and 35 Campbell, o£. cit.t p. 150. 36loc. cit. 57) direct controls. The burst in public spending was financed by cheap and ample bank credit and by the residue of liquid •57 assets remaining from World War II. 1 The answer of the government to the price spiral in 1 19^2 and 1951 was direct price controls, adjustments in tax,rates, and low rates of interest. Pattern of the Stabilization Program OPA and OPS emphasized the necessity for limiting purchasing power with the support of price controls. The former also depended upon rationing. Purchasing power was limited in another way, namely, by restrictions in consumer credit, and by wage controls. Any surplus still remaining ■ (in terms of the inflationary gap) had to be siphoned off by taxes, loans to the government, voluntary or compulsory, and savings. Each agency assumed that if the disposable income left in the hands of consumers was limited so that it was equivalent to the available goods at current prices,j then there would be no upward pressure on prices, and theoretically price controls, as such, would be largely unnecessary.39 Further, taxes and loans out of incomes < i . ---------------- j 37Tibor Scotovsky, Edward Shaw, Lorie Tarshis, Mobilizing Resources for War (New York: McGraw-Hill Book Company, IncT, 1951), p. 240. 38Lo c. cit. 39campbell, loc. cit. j 58 would give the government sufficient revenue to meet its obligations. Many of these assumptions made by the agencies failed to materialize. Rent Controls In the control of rents, the Administration dealt with a commodity which was easily defined, the price of which was known to both buyer and seller. The Administra tor could count on the co-operation of the buyer. It is probable that in this area price controls were most suc cessful both under OPA and OPS. Before the passage of the first Price Control Act, OPA's activities were limited to 1 | ' ! jLocal Pair Rent Committees. On March 2, 1942, 20 areas in 13 states were defined as Defense Rental Areas. As a part of the GMPR, 302 areas with a population of 86 million people were added to the program April 28, 1942. On October 5* 1942 when additional areas were added, prac- 40 tically the whole country was under the program. Rent controls were not nearly as widely extended ! t over the population under OPS. As was true of OPA, critical. i defense areas were under regulation. On September 30, 1952 ^Don D. Humphrey, ’ ’Price Controls in Outline,” American Economic Review. 32:757 (December, 1942). when OPS suspended rent controls on 80 per cent of its i units, the critical areas composed only 1,5 0 0 ,0 0 0 units of rental housing; 6,0 0 0 ,0 0 0 other units were decontrolled. Rent controls were maintained on 16 areas listed as criti cal areas; and incorporated cities, towns, and villages i j . - ! whose local governing body requested it. Consumer Rationing | The rationing of consumer goods was not a part of the OPS program. In contrast, it formed an integral part of 0PA. At the peak of World War II rationing in 19^3, the rationed commodities represented only about one-seventh| H-2 of. the total consumer expenditure. Moreover, in World War II, rationing was very unpopular with large numbers of f people. A part of the explanation is to be found in j inability to believe that there were really shortages, i lack of understanding of the rationing systems, and mis- takes in administration. J There were some who believed that if prices were ■ fixed, wages would be automatically stabilized since the ^ 1 1 Rent Controls," Time, 6 0 :8 3 (July 14, 1952). i 40 ; Lester V. Chandler and Donald H. Wallace, Economicj Mobilization (New York: Henry Holt and Company, 1951)> 1 p. '47. ^3Ibid., p. 5 1. 60 two were intimately linked. As the Act was finally passed by Congress, the National War Labor Board was created. It had jurisdiction over increases of wages and salaries and other wage adjustments. A comparable board, the Wage Stabilization Board, was created with the adoption of the Defense Production Act of 1950* It did not have as much power as the Nationalj War Labor Board. It could, however, assume jurisdiction j over labor disputes which were not resolved by collective I bargaining or by prior full use of conciliation and media- ' tion facilities and which threatened to interrupt work thatj was pertinent to the national defense. Much of this power ■ j granted to the Wage Stabilization Board was later taken j from it by the 82nd Congress. j Conflictions of Authority i Price controls and rationing during World War II ^ j 1 were the responsibility largely of one agency, the Office of Price Administration,. The War Labor Board (WLB) was • responsible for wage control, and the Office of Economic : Stabilization (OES) was supposed to reconcile differences ! among the stabilization agencies. Allocations and priori ties were largely entrusted to another agency, the War Production Board (WPB). But to some extent, the War Food Administration (WFA) shared this responsibility. There 6l were other agencies established that were responsible for different segments in the economy. Ultimately, the President established a Director of the Office of War Mobilization and Reconversion (OWMR), who was the final i i arbiter and integrator. The interrelation of agencies led directly to con flicts. For example, the OPA was largely manned by college professors who were much less concerned with financial j i i position of firms or with the accustomed manner of doing I business than was the WPB, which was largely a business- 45 man’s organization. ^ In concrete instances, the WPB would seek price adjustments as the means of achieving a rise of output. Aware of the limited availability of free I resources, and hence opposed to the use of price incentive | to increase output, the OPA would seek an order from WPB j as a means of increasing the output of (say) a scarce type of lumber. Whereas the OPA would emphasize authority as the road to better allocation of resources, the WPB in many! 2 l£\ i instances would stress the profit motive. j The conflicts that arose among the agencies were | partly the result of a poor administrative setup, ideological differences, and conflicts on technical ^Harris, op. cit., p. 206. ^ lqc . cit. 46 ________ „Loc_._c it... . . grounds concerning the means of achieving objectives. I It was probably a mistake to set up two independent agencies, one responsible for price primarily, and the other responsible for control of supply and demand. In appointing a mobilization director in December, 1950, with authority over economic sta bilization, President Truman seemed to have learned something from World War II.47 The Generally Fair and Equitable Criterion I One of the weapons available to the Administrator in 1941 to 1945 was not as potent in the fifties. The Administrator could generally deny price rises when profits were not in excess of those in 1936 to 1 9 3 9* In late 1950, J I ] ! the Economic Stabilization Director announced a similar ! test but the relevant years were 1946 to 1949. In 1936 to j I 1 1939, however, annual corporate profits before taxes were | f $5 billions; in 1946 to 1949, $29 billions. With some ! i justice, the Economic Stabilization Administration might j deny price increases even if the average profits were sub- ! 1 stantially less than the 1946 to 1949 level. In this manner, the Administration might neutralize inflationary |factors more successfully. When the "fair and equitable" i 1 \ provision was related to the 1946 to 1949 profits, then ' 1 the protection offered by this provision was probably less j 47 ‘Harris, loc. cit. 6^ than in World War 11.^® In 1936 to 1939, there was a low price level and low profits, and hence the reference to this level in testing the propriety of price increases frequently would preclude a price rise. Since the profits were high in the base period (1946 to 1949) the obstacle 49 of the base was likely to be less effective. ^ I _ _ _ _ _ _ ■ 48 . I Harris, c j d . cit., p . 241. ^Loc. cit. CHAPTER IV ENFORCEMENT OF DIRECT PRICE CONTROL LEGISLATION FROM 19^2 TO 1952 The enforcement of direct price control legislation proved to be a difficult problem. Numerous and occasionally flagrant violations occurred. Many violators were detected; warned, or punished, others were not apprehended. Fre quently, infractions occurred because of the difficulties in understanding the administrative directives. In others, violators saw an opportunity for monetary gains by evasion of the price control regulations. I. ADMINISTRATION OF OPA REGULATIONS Scope of Controls Enforcement of OPA regulations was a herculean task. Sellers, producers, buyers and tenants all were Influenced by price, rent and rationing regulations. Every person was affected. Some businesses appeared not to have fared as well as companion stores having similar products. Some businesses attempted to abide by regulations; others, only partly conformed. The consumer was affected not only by___ the prices themselves, but by the inconvenience of the ; rationing system as well. I The scope of the controls was so broad, the number of parties involved was so great, and the potential violations so numerous, that a reasonable degree of i compliance could be obtained only if there was f generally a voluntary adherence to the rules. j j The Information Department and especially its j Community Service Division of the OPA Enforcement j Department did most of the work towards educating the public to accept OPA regulations. The Community i Service Division presented the requirements of OPA ! regulations and the reasons for them in an effort j to encourage voluntary compliance especially among the consumers; the price panels and their voluntary staffs did an important job of public relations with the retail trades; and the national and field i office price and ration staffs worked with producers i and distributors.1 ; All of these staffs were said to have laid emphasis on compliance rather than enforcement. However, it was ; claimed that it was equally clear that the regulations ; i ■ [ would be fairly and vigorously enforced. It was suggested ( I j to potential violators that violating regulations was | 2 I unlawful, unprofitable and unpatriotic. | Legal Division ! ' At the very inception of the OPA with its varied ' i 1 i i 1 Harvey C. Mansfield, A Short History of OPA. Office of Temporary Controls, Office of Price Administration , 1 (Washington, D.C.: United States Government Printing Office; 1 19^7), P. 255. | i 1 2 1 Loc. cit. j 66 program of control over rent, prices, and rationing, it i was decided that some means would be necessary to enforce OPA regulations. During the latter part of 1941, and before OPA was established, a Legal Division of the j Judicial Department had been created with David Ginsburg as i ; . the General Counsel. The Legal Division was manned by a rather limited enforcement staff in the national office. The primary function of the office was planning, and giving some attention to the prestatutory price schedules. In ! ! 1942, several regional and field offices were opened under ; j the Division of Field Operations. The legal staff in a j ! ! ! regional office was headed by a regional attorney with a I I , regional price attorney, a regional rationing attorney, , and a regional investigator. The last-named had charge of ^ ! compliance surveys and legal investigations, a function ! 1 I which the Legal Division inherited from the former Division’ t of Field Operations on the latter's dissolution. Each of | the regional attorneys was required to give a consolidated 1 . I weekly progress report to the General Counsel. i I I I I Regulation Notices 1 To carry out its policy of compliance with regula tions, the OPA published numerous copies of every enforce- : I ! i ment program: manuals, instructions, and work kits used in J 1 ! connection with enforcement programs, surveys, drives or ! 6 7 ' , projects. In addition, many bulletins were issued giving detailed instructions in the legal field. All of which were periodically changed with changing economic condi tions. The changes were extensive, as seen in the revi sions of the instructions for carrying out the enforcement I I program. i I Federal Enforcemeht It should be pointed out that as in usual cases, I the legal investigators were not permitted to act as they ! i ; ■ saw fit in investigations. As early as December 30, 19^2, | j a memorandum was issued to all regional attorneys laying 1 i down general rules for the guidance of investigations. j I ' k | The general enforcement of OPA regulations was through Federal Governmental Agencies rather than through i ' state and municipal offices. Many states and municipal!- j i ties gave informal administrative cooperation through j I their police forces, health inspectors and the like. This i cooperation did not depend on statutes or ordinances of the states or municipalities. I i ' The Enforcement Department was well equipped to : i ■ carry out the price control law. Perhaps the greatest ! I i | weapon of the enforcement division was the power to insti- i i 1 gate criminal proceedings in District Courts against wilful violators. This was done by presenting facts to i , 6£p ( the Federal District Attorney that would warrant criminal proceedings. The District Attorney then brought charges in the District Court. Criminal proceedings.— Perhaps the most important suits that the OPA could bring in its own name were: The treble damage action.— This was designed to | make overcharging in rents and selling over the price i ceilings highly unprofitable practices. For a while only the consumer could file such charges. Later this privilegel was extended to the OPA. ! The right to suspend licenses.— In order to operate ! ; i j gasoline stations, grocery stores, markets and many other J i i establishments, states and municipalities often required | i ! J operators to obtain licenses. If and when these licenses I i j were suspended or revoked, the operator was forced out of I I j business until such time that a new license was obtained j i I I in case of a revoked license; and when suspended, until ! ! ' i i the period of suspension was over. Upon flagrant violation; I i of an OPA regulation, the license of an establishment was j suspended. This was done in numerous instances and those | places where the license was suspended were closed for a f definite period of time. 69 Enforcement of injunctions.— This was perhaps the weakest of the three civil proceedings that could be launched by the OPA. This weakness was primarily due to the fact that there were no provisions made for punishing violators of injunctions. However, its effectiveness was | in the power of the court to designate what the penalty would be once a violation was committed. . . Hecht v. Bowles Case.— The only legal issue OPA lost in an enforcement case in the Supreme Court was Hecht Co. j ! o I v. Bowles, decided February 28, 1944. In this case OPA i j had found numerous violations in a Washington department i | store and applied to the district court for an injunction. ! j It was refused on the ground that the store had shown good ; j faith and vigorous efforts to avoid violations; in this j ; view the injunction could only tell the store to keep on trying harder. The Court of Appeals, however, held that ! * the issuance of the injunction on OPA's application and on j a showing of existing violations, was mandatory. The i : Supreme Court took the opposite view, concluding that the ■ courts retained discretion over the issuance of injunctions, ; in the circumstances shown. OPA's alarm over the conse- i \ t j quences of this decision proved unfounded; they were j ' 3Ibid.. p. 270. 70 TABLE I OPA. AND OTHER CASES, CIVIL AND CRIMINAL, COMMENCED IN 84 U.S. DISTRICT COURTS, FISCAL YEARS 1943-1947 Type of Case 1943 1944 1945 1946 1947 All civil cases 2 8 ,1 6 6 29,742 52,144 57,512 48,8 0 9 I OPA cases 2,219 6,524 28,2 83 31,094 15,169 Other U.S. cases 15,686 13,325 13,804 13,837 13,990 Private eases3 , 1 10,261 9,893 10,057 12,581 19,650 1 All criminal cases j • • • 37,063 37,070 30,665 31,114 I OPA cases 1 (2791)b 4,524 4,753 2 ,5 2 0 1,454 1 Others * • • 32,539 32,317 28,145 29,660 a About 5 per ;ions. cent of these were based on OPA regula- I d Number of defendants ;he number of cases commenced 5281 for 1944; 5532 for 1945; 1947. charged, somewhat larger ; the comparable figures 3477 for 1946; and 2079 than are for | Source: Harvey C. Mansfield, A Short History of OPA. Office of Temporary Controls, Office of Price Administration (Washington, D.C.: United States Government Printing Office, 1947), P. 271. 71 wholesome. Under the decision, denial of an injunction was proper only where it would not ’ ’effectuate the purposes . . 4 of the Act. It required OPA to take greater care in pre senting its injunction cases, to show the clear need for that form of relief. The majority of the OPA cases were disposed of by | consent of the parties rather than by going into court. During the five year period from 1942 to 19^7* OPA insti tuted a total of 3 8 0 ,000 sanctions against violators of 1 1 price, rent and ration regulations. This was an average of j f 55>O00 cases a year.-* The average was considerably larger I t after 1943 and involved 3>000 investigators and 800 ! attorneys.^ j During the period 1942 to 1947, 1 6 7 ,7 74 proceedings were closed. Of these OPA won 127,804 and lost 8,465; the ^Ibid.. p. 271. 5Ibid.. p. 2 7 2. 6 Mansfield's data are in sharp conflict with those of Auerbach (Alfred Auerbach, OPA and Its Pricing Policies j[New York: Fairchild Publishing Co., 1944], p. 68.) 1 {According to the latter writer, during 1943 alone, OPA { {conducted 650,000 investigations. There were 280,000 vio- 1 lations, of which 170,000 were closed with warning letters. ; Over 48,000 involved revocation of rationing privileges. j There were 25,000 settlements of damage suits. Over 4,500 injunction suits were filed; and over 750 treble damage ! suits. During this period, OPA collected $4,500,000 in treble damage suits and $1,000,000 in criminal prosecutions. 72 remainder were withdrawn late in 19^-6 and 19^7* Those that were withdrawn because of lack of manpower to handle them were cases involving $200 or less. The'other cases of 7 consequence were transferred to the Department of Justice.1 i II. ABUSES UNDER OPA Rent Control Some of the most flagrant of the OPA abuses were related to rental controls. The Emergency Price Control Act of 19H-2 empowered OPA to fix rents in areas declared by it to be defense rental areas. By 19*1-5, OPA was adminis tering rent controls in over 60 per cent of the housing i i units. Rents on previously occupied dwellings were frozen j at the rental rates in force a few weeks prior to the passage of the Emergency Control Act. On new dwellings, a maximum rental charge was set by OPA for that area. Thus, ; the same community houses of similar size and construction did not always bring landlords the same amount of income. Furthermore, both landlords and tenants found ways to avoid j the law. j It appears as though some of the most evasive prac- J tices were performed by tenants. Subletting by tenants was ^Mansfield, loc. cit. 73 a common practice in many cities, especially in California, Oregon, New York, Pennsylvania, and perhaps elsewhere. Tenants often charged exorbitant prices of the subtenants. For lack of places to live, subtenants did not usually report these cases to the authority. Occasionally as a i condition of obtaining an unexpired lease, the prospective purchaser was required to purchase the furniture of the person who held the lease at a price far above the market value of the furniture. The action of some landlords was not above reproach. The act provided for an increment in rental for capital | improvements. Some landlords were able to increase their rents by making minor property improvements which were not in proportion to cost. Another practice was the accepting of bonuses by landlords as a requisite for obtaining a desired place. Equally prevalent in evading rent controls, was the practice of furnishing houses or apartments with used or cheap furniture in order to receive higher rents. Similarly, rent regulations were circumvented by property owners making "duplexes" out of single dwelling units once j they became vacated. Brand Names i After prices were frozen on food products at the level of March 19^2, numerous "new brands" appeared on the 7^ markets. When new brands appeared, a ceiling had to be placed on them. Invariably the ceiling placed on these "new" products was higher than those on similar products. This unscrupulous method was used by some producers to secure prices above the ceiling for their products. In order to prevent such evasion of the price regu- i lations, the OPA had originally been empowered to prevent any practice which was considered to be equivalent to price Increases. Grade labeling of canned products was ordered j on all canned goods appearing on the market in 19^3. j i According to this method, canned goods were to carry grade i labels of the letters A, B, or C for the different grades of goods. Similar labeling was required on meats. j r Distribution of Gasoline j The control over the distribution of gasoline was a difficult problem for enforcement agents. The use of coupons by consumers to buy gasoline proved to be an adept method to escape conformance to regulations. Counterfeit ( coupons, and the transfer of surplus coupons appeared to be useful methods of evasion. Consumers not only transferred coupons among themselves, but frequently dealers were able to obtain these surpluses either by gift, or by purchase. With the excess, the dealer bought excess gasoline and this 75 Q was sold at black market prices. A Case Against the “Product Standard1 1 As has been indicated elsewhere, the 1 1 Product Standard” might require an increase in the ceiling of a product even though the industry as a whole was in a pros perous condition. In approving the OPA "Product Standard," i the court upheld the fairness of the standard which assured the industry that no ceiling would entail manufacturing of a product or related group of products at a loss. However, when the Gillespie-Rogers-Pyatt Co., Inc. took OPA to court I for refusal to permit them to raise the ceiling on products ' that were manufactured at a loss, the court ruled against j the company. The court ruled against the corporation with- \ out^taking the trouble to define this standard with pre- i i cision beyond noting that direct labor and material costs must be covered, and that general sales and administrative expenses must be excluded.^ d - „ James A. Maxwell, Gasoline Rationing in the United States," Quarterly Journal of Economics. 51:151* 1946. ^Gillespie-Rogers-Pyatt Co. v. Bowles 144F (2d) 361 (Emergency Courtof Appeals, 19^?). 76 Relief of Individual Companies from Pricing Regulations The position of individual companies was the subject of two basic principles established by the Emergency Court of Appeals during World War II. First, the fact that individuals suffered losses does not demonstrate that a regulation is not "generally fair and equitable" or is invalid; v second, where a regulation contained an adjustment provision, it was arbitrary to deny relief to an applicant who makes a case within the framework of that provision. As sound as these two principles may seem, it Is possible that a company could suffer inequities under them. An example of a possible discrepancy was the ruling or rulings by the Emergency Court of Appeals In the case of several subsidiaries of Wilson and Company. These com panies had objected to Ceiling Price Regulation 24 (CPR 24). This regulation permitted higher markups to Independent hotel supply houses than establishments affiliated with packers. The protestants relied primarily on Booth Fisheries Corp. v. Bowles 153 P* (2d) 449, which held that inte grated wholesalers of fish were entitled to the same margin as non-wholesalers. The Director's denial opinion rested on evidence showing historical markup differences between the two types of supply houses, and the reasonableness of the classification in producing fair but yet effective price controls in view of the supply and advantages enjoyed by affili ated sellers. The Director's opinion involved Safeway - ^OPS: Legal Phases of Price Controls, 33009, p. 5* 77 Stores v. Bowles 1^5F (2d) 836 where the court upheld a regulation which classified retail food stores not upon the Basis of service rendered but on the basis of volume of sales and the type of ownership such as chain stores, and assigned lower markups to "supermarkets and chain stores. " 11 III. EFFECTIVENESS OF ENFORCEMENT OF OPA REGULATIONS Contradictory Assertions of OPA It is extremely hazardous to estimate how effective enforcement of price controls was without suitable evidence in terms of compliance due to enforcement. In the case of > OPA, the best evidence that it was on the whole successful was seen in the relative stability of the price indexes. The comparisons made by the Research Division and | included in the testimony to congressional committees j showed that prices of commodities under control rose much less than those that were exempt. Additional selected evi dence can be cited that uncontrolled prices rose much faster; I 1 than controlled ones. Data of the Bureau of Labor Statis- ; tics indicated that controlled food farm products rose only j 0 .0 2 9 per cent while uncontrolled products increased 0.12 per cent. In the meantime, the retail food index increased 110PS: Legal Phases of Price Controls, loc. cit. 78 6.4 per cent from March to August, 1942. Much of the latter movement can he accounted for by the fact that many food items were under no form of price control. When the items included in the index are divided into groups of controlled and uncontrolled commodities, it is observed that the price rise of controlled foods from March to August was only 3*0 per cent. The index of uncontrolled foods, on the other hand, advanced 11.9 per* cent. It is also noted that controlled foods showed a definite reduc tion in prices from May to June, 1942 (at the time that the General Ceiling Price Regulation went into effect) and only I a slight increase in July. On the other hand, the prices ; j of uncontrolled foods moved rapidly upward from May to June,* 1942 and continued the rise during July. The behavior of uncontrolled food prices indicated the inflationary ten- 12 dencies in the absence of rigidly enforced price controls. Retail price indexes on large numbers of items do not entirely support the reports as prepared by the Office of Price Administration. It appears very likely that such ! < J indicated reports represent only half-truths which were prepared primarily for the purpose of propaganda. 12 Mansfield, o£. cit., p. 51. 79 The measures of effectiveness.— There are several criteria that may be used to determine the effectiveness of direct price control programs. For example: (l) obviously the simplest measure is the extent to which prices rise; (2) the rise of output in the face of the restraints imposed upon price controls is another criterion of the success of price controls. Above all, it is necessary to increase output. Should price controls jeopardize this rise, or substantially reduce output below the potential, then price controls may well be considered a failure. Actually, the official figures point to a general rise from 1940 to 1945. Tighe E. Woods, however, flatly denied that statistical evidence alone can be used as a measure of j 14 the effectiveness of the stabilization program. A third measure of effectiveness is the amount of profits earned by business in the course of war. Obviously 1 if the Price Administrator fails in his objective of stabilizing the economy, profits could rise skyward. 13 Seymour E. Harris, The Economics of Mobilization and Inflation (New York: McGraw-Hill Book Company, 1951), p. 213” 14 Tighe E. Woods, Price Stabilization, October, 1951 ' to September, 1952. Summary of Operations. A Report to the Joint Committee on Defense Production of the United States, United States House of Representatives (Washington, D.C.: United States Government Printing Office, 1952), p. 16. 80 An examination of business profits in the war period does not suggest any great success of the Price Adminis trator. Profits rose greatly over profits made during the prewar years, even though there was an increase in the volume of business. For example, total profits for business before taxes from 1936 to 1939 were $1 6 .5 billions; from 1942 to 1945 they were $49.4 billions; and from 1946 to 1949 they were $6 5 .9 billions.1^ In Table II are presented index numbers of the retail prices of important services and miscellaneous goods commonly purchased by moderate-income families living in large cities of the United States. Tables III, IV, V, and j VI include items which were controlled as well as some which were not controlled by the Office of Price Adminis tration. Additional evidence can be cited to illustrate that in many instances prices continued to rise between 1942 and 1947 in spite of the fact that the OPA maintained that 1 consumer prices were held in check. Los Angeles, New York City, and Chicago have been chosen to substantiate the t preceding statement. I t IS -'Harris, loc. cit. 8l TABLE II INCREASES IN MISCELLANEOUS GOODS AND SERVICES*, 1940-1946 (INDEX NUMBERS, 1935-1939 = 100} Year Index Year Index 1940 101.1 1943 1 1 5 .8 1941 104.0 1944 121.3 1942 110.9 1945 124.1 1946 1 2 8 .8 ♦Miscellaneous group covers transportation (such as I automobiles and their upkeep and public transportation ; costs; medical care (including professional care and medi- j cines); household operation (covering supplies and different kinds of paid services); recreation (that is, newspapers, i motion pictures, radio, television, and tobacco products); j personal care (barber and beauty shop services). | Source: Handbook of Labor Statistics, 1950 Edition, j p. 100. United States Department of Labor (U. S. Govern- j ment Printing Office). j TABLE III CONSUMERS' PRICE INDEX FOR MODERATE-INCOME FAMILIES IN LARGE CITIES, BY GROUPS OF COMMODITIES (1935-1939 = 100) Year Average All Items Food Apparel Rent Fuels* Household Furnishings 1941 1 05.2 105.5 106.3 106.4 108.3 107.3 1942 1 1 6 .6 123.9 124.2 1 0 8 .8 115.1 122.2 1943 123.7 1 3 8 .0 219.7 108.7 120.7 1 2 5 .6 1944 125.7 136.1 1 3 8 .8 109.1 1 2 6 .0 136.4 1945 1 2 8 .6 139.1 145-9 109.5 128.3 145.8 1946 139.5 159.6 1 6 0 .2 110.1 136.9 159.2 1947 159.6 193.8 1 8 5 .8 1 13.6 156.1 184.4 1948 171.9 210.2 198.0 121.2 183.4 195.8 1949 170.2 201.9 1 90.1 126.4 187.7 1 8 9.O 1950 171.9 204.5 187.7 1 3 1 .0 194.1 190.2 *Gas and Electricity excluded; includes other fuels. ! Source: Monthly Labor Review, Vol. 73, No. 4, p. I 515, 1951. TABLE IV CONSUMERS' PRICE INDEX FOR LOS ANGELES, 19*1-19*7 (INDEX NUMBERS, 1935-1939 = 100) Year Food Housing Clothing Fuel House furnishings 1941 111.2 100.6 1 0 3 .0 95.5 106.1 1942 134.0 104.8 120.0 95.4 120.1 19^3 149.3 104.6 122.7 94.6 120.3 1944 147.4 105.4 124.8 93.4 120.7 1945 152.3 106.2 125.1 93.4 120.9 1946 170.1 1 0 6 .2 131.5 93.4 126.5 1947 204.5 107.5 144.4 93.4 136.7 Source: Robert A. Sayre, National Industrial Conference Board, Inc. (New York, New York), p. 66. TABLE V CONSUMERS1 PRICE INDEX FOR NEW YORK CITY, 1941-1947 (INDEX NUMBERS, 1935-1939 = 100) Year Food Housing Clothing Fuel House furnishings 1941 109.7 100.4 107.2 101.5 109.0 1942 1 2 5 .6 100.8 126.6 102.8 1 2 7 .0 1943 140.8 100.8 1 3 0 .0 1 0 5 .0 1 2 8 .0 1944 140.0 100.8 134.0 107.7 130.2 1945 141.8 100.8 135.2 108.3 132.8 1946 159.5 100.8 139.7 109.5 139.1 1947 194.9 101.2 150.7 111.6 151.5 Source: Robert A. Sayre, National Industrial Conference Board, Inc. (New York, New York), p. 72. \ TABLE VI CONSUMERS' PRICE INDEX FOR CHICAGO, 1941-1947 (INDEX NUMBERS, 1935-1939 =100) Year Food Housing Clothing Fuel House furnishings 1941 112.1 100.3 103.2 96.4 107.1 1942 129.3 104.7 121.0 98.0 124.0 1943 142.7 105.7 124.1 97.7 124.7 1944 141.7 1 0 5 .8 129.9 98.9 125.3 1945 145.6 1 0 5 .8 133.5 99.4 129.0 1946 166.3 1 0 5 .8 137.9 95.9 132.9 1947 210.4 109.5 149.6 101.9 143-3 Source: Robert A. Sayre, National Industrial Conference Board, Inc. (New York, New York), p. 56. 86 Also, the percentage increases of consumers1 prices show that prices were not rigidly held in check as it was stated in numerous memorandums which were published by the OPA. This is indicated in Table VII. IV. ENFORCEMENT OF OPS LEGISLATION Nature of the Program The legal phase of the administration of price stabilization has consisted principally of the activities and rulings in connection with validations, drafting, and interpretation of regulations and orders. Many of the latter were opinions of the General Counsel but for the most part were reflected In formal action of the Office of. Price Stabilization such as the opinions of the Director. That most of the enforcement of OPS regulations was through education of the public was seen from the reports from the Office of Chief Counsel in Washington, D.C. Between February 1, 1951 and January 1, 1952, the Office of Chief Counsel issued approximately 12,500 written inter pretations. Although adequate records were not kept, the number of explanations in the course of telephone calls were much greater. For six months ending December 31, 1951, the field offices issued almost 1 2 ,5 0 0 written interpreta tions and more than 100,000 explanations in the form of TABLE VII PERCENTAGE INCREASES IN CONSUMERS' PRICES, AUGUST, 1939-JUNE, 1948 Items August, 1939- Dec ember, 1941 December, 1941- August, 1945 August, 1945- June, 1948 August, 1939- June, 1948 All Items 122.2 1 6 .8 36.6 6 5 .6 Pood 22.5 27.7 76.8 1 2 7 .0 Housing 4.0 0.5 6.1 10.6 Clothing 12.7 20.8 22.6 56.1 Fuel 4.8 5-8 1 5 .0 2 5 .6 House- furnlshings 1 8 .1 10.9 27.4 56.4 Sundries 6.4 1 7 .0 21.7 4 5 .1 | Source: Robert A. Sayre, National Industrial Conference Board, Inc. (New York, New York). i 88 " L 6 visits and telephone calls. Types of Interpretations Since so much of OPS enforcement was in the form of interpreting regulations, it would he of some interest to classify into groups the majority of the inquiries. Classes of purchasers.— In applying the price ceiling regulation, it was important to determine whether two pur chasers were in the ” same class.” Such as, if A and B were purchasers of the "same class,” the ceiling price for both was the highest price at which deliveries were made to either one during the base period. However, if A and B : were in different classes, each had his own ceiling at the highest price at which base period deliveries were made to I 17 members of their respective classes. ' i t Increased transportation costs.— The increases in \ freight rates authorized by the Interstate Commerce Com mission (ICC) in April and August, 1951* raised the problem of whether the General Ceiling Price Regulation (GCPR) per mitted a seller to pass on such increases to buyers. Sellers who used f.o.b. prices during the base period and • ^Legal Phases of Price Controls, op. cit., p. 17. 17L o c . cit. 89 required buyers to absorb transportation increases were permitted to pass on the increased transportation costs. However, sellers who used delivered prices during the base period were required to absorb transportation cost increases unless the delivered price had been consistently computed on f.o.b. price adjusted for actual cost of delivery to each purchaser. Many sellers who sold at delivered prices during base period desired to shift to an f.o.b. basis. This was permitted only if the seller reduced- his ceiling price by 18 the amount of each purchaser's actual freight cost. Same commodity.— Another question that frequently arose was whether two commodities were the 1 1 same commodity1 1 j for the purpose of establishing a ceiling price under Section 3 of GCPR or comparable provisions of other regula tions. Commodities were considered nearly the same when there was physical identity as to source, size, weight, and physical outline. This problem frequently arose in connec tion with the sale of slightly different commodities intro duced after the base period. In most instances involving { merely change in size, the new commodity was considered the | same commodity as the base period commodity, and the seller ! l8Ibid.. p. 1 8. 90 was required to reduce; or was permitted to increase his ceiling price proportionately to the change in contents but not permitted an allowance for change in package costs. If the change was only in package type, the commodity was generally considered the same, and no increase was permittee, for a more expensive package. When cheaper packages were i used and resulted in decreased utility to purchaser, a j I reduction was required in proportion to the c o s t . j Changes in terms and conditions of sale.— The standard provisions of GCPR and other regulations required that ceiling prices reflect or include customary differ entials, discounts, allowances, premiums, and extras, and j terms and conditions of sale. Under this provision, it J i was held that a seller was not prohibited from discontinu ing a customary or condition of sale, but if he elected to 1 20 do so, he had to reduce his ceiling price accordingly. Deposit charges.— As food and beverage containers became more difficult to obtain or increased in price, many retailers wished to introduce deposit charges for containers i or increase existing deposits. It was held that a seller • ^Legal Phases of Price Controls, loc. cit. 20Ibid., p. 1 9. 91 whose base period prices included a container could change to a returnable-c.ontainer basis only if he deduced from his ceiling price an amount at least equal to the value of the empty container. A retailer could then ask a reasonable deposit charge, defined in relation to the supply, replaceability and durability of the container. Usually if the container was easily broken, or lost, or was readily replaceable, the replace cost was considered the reasonable deposit charge. In other cases, a deposit charge in excess of the container pi replacement cost could be considered reasonable. i New excise tax.— Many price problems were created by I the Revenue Act of 1951, effective November 1, 1951* which 1 t included certain Federal excise taxes and imposed new taxes. OPS issued a series of amendments to GCPR and the general manufacturing regulations, such as CPR 22, and 23, estab lishing the conditions under which sellers would be per mitted to reflect the new or increased taxes in their ceil- 22 ing price. i i i 21 Legal Phases of Price Controls, loc. cit. 22 Loc. cit. 92 Tie-in sales.— In television and certain other industries, it was customary during the base period for some manufacturers to include a short-term warranty on the purchase price of the commodity. After the ceiling price regulation went into effect, these manufacturers asked whether they could substitute a mandatory long-term warranty at an additional charge. The Chief Counsel ruled that the charge would require the customer to buy something in addition to the commodity that he had not been required to buy in the base period which would constitute a tie-in sale i in violation of the standard evasion provision of the | 23 regulation. ^ ; i Protests | Up to December 31, 1951, only 227 protests had been ! filed with the Price Director. Of these, 180 were disposed of and 47 were left pending. The majority were protests i against ceilings on meat, groceries, industries and serv ices. The Director granted full or partial relief to approximately one-half of the protests filed. A large number of the protests were dismissed because of failure to i comply with the jurisdictional provision of the Act or with 2^Legal Phases of Price Controls, loc. cit. 93 24 the requirements of price procedural regulation. Some of the enforcement procedures were in the nature of filing complaints by OPS. On November 17, 1931, Edward P. Morgan, Enforcement Director announced a backlog of more than 21,000 investigations into complaints that OPS regulations had been violated. In a monthly report, he i revealed widespread activities on the part of nearly 1 ,0 0 0 \ enforcement agents to see that provisions under the law for holding the price front were complied with. Each agent during October made an average of 21.7 investigations. i During the same month, there were 3*317 compliance confer- | i ences held, 2153 cases were closed following conferences ] I and settlements were effected in forty-three cases, totaling 25 1 $64,499.60. Further evidence that the Enforcement Agency of OPS was requiring maximum conformance and not tolerating violations was seen by the survey made by enforcement agents of butcher shops in the Manhattan area in December j 1951* These agents investigated 124 establishments and showed that 117 were violating agency regulations. The Safeway complaint.— Of all of the cases filed in the Emergency Court of Appeals up to the end of 1951, 24 1 Ibid., p. 22. ^^New York Times, November 18, 1951* P* 33* 94 perhaps the most important was that involving the Safeway l Stores. The latter held that the ceiling price regulations were unfair. The Safeway Stores, Inc. filed suit against Michael V. DiSalle alleging that GCPR was unfair and inequitable in freezing prices of retailers while certain other costs were rising. The second point raised by Safeway was against the trim requirements of CPR. It was alleged that the regulation worked a hardship on a group of chain stores which customarily trim their meat with even less fat than was permitted by OPS regulations. The third allegation was concerning the Herlong Amendment. According to Safeway the amendment did not permit the customary i I margins that they enjoyed on individual commodities. The fourth point raised by Safeway was that retail meat prices did not reflect parity prices to hog producers. Also, Safeway objected to their classification as a D "super- i market" chain. On January 18, 1952, the court rejected the ! attack by the Safeway Stores on the general ceiling price regulations. A short time later, Safeway urged the Committee on I i Banking and Currency to initiate an amendment to abolish j the Emergency Court of Appeals for four reasons: (l) it was j necessary for persons to come to Washington to file papers and argue cases before the Emergency Court of Appeals; 95 (2) that the deposition of cases by the Emergency Court of Appeals was a slower process than in the ordinary Courts of Appeal; (3) that Judges of the Emergency Court of Appeals were not Federal Judges; and (4) that the scope of the review of the Emergency Court was more limited than that of regular Courts of Appeal. In a letter to Brent Spence, Chairman of the Committee on Currency and Banking, Ellis Arnall categorically denied these allegations. He pre sented evidence satisfactory to the Committee that the p6 Safeway Stores had erred in each of their allegations. Enforcement Objectives The main objective of the enforcement policy as ! stated by the Director of Price Stabilization Michael V. j DiSalle was to protect honest businessmen against unfair competition and consumers against unfair prices. Effective enforcement of price regulations also prevents diversion i 1 of supplies from normal and legitimate trade channels.2^ It was stated that the OPS was not interested in building a record of violations. Its primary objective was Ellis Arnall, OPS: 1952-2 3 2 6 3. A letter to 'Honorable Brent Spence, Chairman, Committee on Banking and Currency, May 20, 1952. 2?Michael V. DiSalle, "Price Stabilization to October, 1951,” A Summary of Operations to the Joint Com mittee on Defense Production of the United States Senate, j -Uni.ted_S.tates_House_of_Repr-esentativ.es,—p.— 9-.____________-___I said to be only to effect maximum compliance -with minimum resortraent to enforcement powers, and with minimum incon- ?8 venience to business and consumers. The Office of Enforcement in the past recognized that a reasonable opportunity had to be afforded for the i business community to familiarize itself with price regu lations and to adjust itself to them. During this period, the main activity of the Office was to conduct investiga tions covering many thousands of businesses of different kinds. These investigations were intended primarily to determine whether compliance with regulations had been effected; to assist, so far as feasible, honest businessmen | willing to comply in obtaining an understanding of their j J obligation and in adjusting their records and pricing methods to their new obligations under the law. Director Michael V. DiSalle reported to the Joint Committee on Defense Production that during this period a number of actions was instituted against wilful violators. Neverthe less, he pointed out that a nation-wide campaign to enforce l meat price controls was initiated on August 17, 1951. As a result, a series of court actions, injunctions, and inves tigations of alleged overweighing and false grading were in process. i | _________DiSalle, loc. cit. _________________________________| 97 The effort was intensified in September 1951 with practically all OPS enforcement agents participating to i find out whether slaughterers had been recouping their losses by selling at illegal prices livestock which had been bought at over-ceiling prices. Over 200 violations were uncovered in more than 50 cities. Strengthening the Program In order to further strengthen the enforcement pro gram, it was originally recommended by thp Director to the Joint House and Senate Committees on Banking and Currency ! I in 1951 that the following amendments, which were later passed, be adopted: Sanctions against buyers.— The first amendment 1 empowered the President to prescribe the extent to which payments by business firms above price ceilings would be disallowed by the Government for tax and other purposes. This would parallel the existing provision regarding viola tions of wage regulations. It was designed to provide an effective sanction against buyers who violated price ceil- ! ings. j 2^DiSalle, loc. cit. The law empowered OPS to start criminal or injunc tion proceedings against a business purchaser who was in violation, since he was as guilty as the seller. But experience had taught that such proceedings against buyers were very difficult to prosecute. And, of course, the treble-damage provision, which was effective against the seller, had no possible application against the buyer.3° Disallowance of fines, penalties and compromises in tax deductions.— This amendment provided that the President could prescribe the extent to which fines, penalties, or compromise sums paid as a result of price violations could be disallowed for tax and other purposes.31 Court orders suspending licenses for violations committed after warnings.--The amendment granted licensing authority to the President. Under this authority,, duly licensed business firms were given warning of price viola tions. If they repeated the violation notwithstanding the warning notice, they were to suffer suspension of license for a period not to exceed 12 months. Suspension was •30 Michael V. DiSalle, ’ ’Price Stabilization to Date," Memorandum to the Committees on Banking and Currency, United States Senate, United States House of Representa tives, May, 1951, p. 21. 31Ibid., p. 22. 99 ] 1 ordered only by the court and the remedy appropriate to the facts of the case were to be in.the hands of the court. Michael ¥. DiSalle believed that greater flexibility was ^2 afforded in enforcement operations. Removing $10.000 limit on triple-damage suits.— The j last of the amendments dealing with enforcement was the one I i that removed the limitation of treble-damage to $10,000. In the law, there was a glaring inequity between the large and the small violator. For example, if a company wil fully overcharged to the extent of $200,000 it was liable | I to a treble-damage action in the amount of $210,000, of I which $200,000 was the amount of overcharge. This repre sented only a 5 per cent penalty. On the other.hand, a J violator who overcharged to the extent of $3,000, for ! j example, could be liable for triple-damage, or for a total sum of $9,000. Once the illegal overcharge exceeded $3,333.33 the penalty decreased and the larger the crime, the more the penalty decreased.33 j 3^DiSalle, "Price Stabilization to Date," loc. cit. j 33Ibld.. p. 2 3. ! 100 V. EFFECTIVENESS OF ENFORCEMENT OF OPS Allegations of OPS The OPS asserted that its program was quite effec tive in curbing the inflationary pressures and restoring orderly markets after the passage of the Defense Production Act of 1950* The data presented by the OPS to support its j contention were remarkably similar to the type published by the OPA in that statistical information is not in agreement with the claims of either of the two Price Administrations, j The following assertions have been made by 0PS:J Raw material prices.— Between the invasion of Korea and January 26, 1951# the Bureau of Labor Statistics 28 ! Spot Commodity Index advanced 47.2 per cent. After the I issuance of the general freeze this index fell about 10 j per cent.35 I Wholesale prices.— Between the invasion of Korea and the general price freeze the Bureau of Labor Statistics monthly index of the average wholesale prices rose almost ; 84 Baslc Facts About Inflation and Stabilization. Office of Public Information, Office of Price Stabilization (Washington, D.C.: United States Government Printing Office, 1951), PP. 1-2. <Loc. cit. 101 18 per cent. After the general freeze they declined 3 per cent.36 Between the invasion of Korea and the general price freeze, consumer prices skyrocketed helter-skelter: retail food prices climbed more than 12 per cent; house-furnishings increased nearly 13 per cent. All these and other increases boosted the cost of living 8 per cent to an all time high.37 During the six months after OPS price actions took effect, retail food prices were said to have risen only 1 i per cent; clothing did not rise at all; house furnishings advanced only 1 per cent. The total cost of living increased only 1 per cent.3® The table on the following page was published to reflect some changes in the price of consumer goods before and after the OPS freeze took ! effect.39 Key components of the national defense effort were affected by price stabilization. For example, between the I \ f outbreak of Korea and the general freeze, the price of , I metals and metal products rose nearly 9 per cent. After ! ^ Michael V. DiSalle, Price Stabilization to October i 11951. Summary of operations to Joint Committee on Defense I Production, 1951, p. 6. ! 37 1 1 ABC of Price Stabilization, Office of Price j I Stabilization. Washington, D.C.': United States Government 1 ■Printing OffTce, 1951, P* 11. ^Loc. cit. 3%iOC. cit. O h lv w a tty o f S o u th e rn C a lifo rn ia LI o r a l) TABLE VIII CHANGES IN CONSUMERS1 PRICES BEFORE AND AFTER THE OPS PRICE FREEZE TOOK EFFECT IN FEBRUARY, 1951 From invasion of From OPS price Korea to OPS freeze to June price freeze 15, 1951 All items Up 8.0$ Up 0.8$ Foods Up 11.3$ Up 0.4$ Apparel Up 9.4$ Up 1.0$ Rent Up 2.4$ Up 1.3$ Fuel, electricity, and 3.5 $ 0.3$ refrigeration Up Down House furnishings Up 13.5$ Up 1.3$ Miscellaneous Up 5.6$ Up 1.0$ Source: Basic Facts About Inflation and Stabiliza tion. Office of Public Information, Office of Price Stabilization (Washington, D.C.: United States Government Printing Office, 1951), p. 6. 103 that time, it is claimed that the metals did not advance i i at all. Between the invasion of Korea and the general freeze, building materials were supposed to have declined nearly 2 per cent. Table IX shows some price changes of 15 materials between the invasion of Korea to the OPS 40 freeze, and from the OPS price freeze to June 1951* Furthermore, it is stated that until the issuance of the General Ceiling Price Regulation both businessmen and consumers were bidding prices up violently and with the general freeze, panic buying came to a halt and the trend 4l was towards moderation. i Facts on OPS Stabilization Program ! ' — — • . . . ' I mm.nr. . i _ _ . , Consumer price indexes cast considerable doubt as to the absolute effectiveness of the stabilization program as has been purported by the "publicity" division of the j Office of Price Stabilization. Index numbers of 34 cities show a considerable increase in consumer prices between January 1, 1950, and January 1, 1951* An increment in 1 consumer prices occurred in 46 cities of the United States | 4oBasic Facts About Inflation and Stabilization. Office of Public Information, Office of Price Stabilization (Washington, D.C.: United States Government Printing Office, 1951), P. 7. 4l Loc. cit. 104 ! 1 TABLE IX , CHANGES IN PRICES OP DEFENSE MATERIALS BEFORE AND AFTER | THE OPS PRICE FREEZE TOOK EFFECT IN FEBRUARY, 1951 ! From invasion of From OPS price Korea to OPS freeze to June> price freeze 1 5, 1951 ; Steel mill products Up 8.1# 0# Aluminum Up 8.6# 0# Copper Up 8.9# 0# Building materials Up 12.9# Down 1.1# Lumber Up 11.5# Down 2.1# Textile products Up 3 2.2# Down 1.8# Woolen and worsted goods Up 52.1# Down 0.2# Cotton goods Up 38.4# Down 4.6# Leather Up 26.9# Down 0.7# Rubber Up 132.3# Down 8.3# Chemicals Up 28.6# Down 3.0# Combat boots Up 90.7# Up 3.6# Fire hose Up 29.7# 0# Ambulances Up 1 6.3# Down 6.5# Surgical gloves Up 5 0.0# Down 19.5# Source: Basic Facts About Inflation and Stabiliza tion. Office of Public Information, Office of Price Stabilization (Washington, D.C.: United States Government Printing Office, 195l)> P* 4. I 105 between January 1, 1951, and December 31, 1952. Tables X and XI are offered as evidence of the increase in consumer prices from 1950 to 1 9 5 2. It is obvious that whatever beneficial results were I obtained by the OPS were not accomplished by pricing actions' I alone. Heavier taxes, restrictions on credit, support from the general public, compliance from business and industry, close coordination with departments and agencies of the Government,, especially those concerned with the defense effort, have been essential to the success of the price stabilization program. VI. EVASIONS OF PRICE CONTROL REGULATIONS j i Tie-in Sales Many ingenious and nefarious schemes were used to j circumvent price controls. One of these was the so-called ! forced tie-in sales. By use of this method, buyers were required to buy a certain amount of second products in order to purchase the desired product. For example, during I |the course of investigations of beef violations in Wichita, ' ' i Kansas, September 28, 1951, enforcement agents of OPS found j that wholesalers and retailers were forced to take a certaiJ amount of other products, such as liver or bacon along with TABLE X CONSUMERS1 PRICE INDEX— U.S. AVERAGES BY GROUPS OP COMMODITIES (INDEX NUMBERS, 1947-1949 = 100) Year All Items Total Pood Apparel Medical Care Personal Care Other Goods and Services 1950 1 0 2 .8 1 0 1 .2 9 8 .1 1 0 6 .0 1 0 1 .1 1 0 5 .2 1951 111.0 1 1 2 .6 106.9 1 1 1 .1 1 1 0 .5 109.7 j 1952 113.9 114.6 1 0 5 .8 117.3 1 1 1 .8 115.4 , Source: Monthly Labor Review, 7 6: No. 3, 344 (March, 1953). TABLE XI i CONSUMERS* PRICE INDEX— U.S. AVERAGES BY GROUPS OP COMMODITIES (INDEX NUMBERS, 1947-1949 =100) H 0 U S I N G ': Year Rent Gas and Electri city Solid Fuels and Fuel oils Household Furnishings Trans- ! porta- tion 1950 108.0 102.7 110.5 100.3 111.3 ! 1951 113.1 102.1 116.4 111.2 118.4 1952 117.9 104.5 118.7 108.5 126.2 | Source: Monthly Labor Review, 7 6: No. 3> 3^4 1 (March, 1953). 108 2ip the beef, or do without the latter. A similar case occurred in buying potatoes. During the week of March 17, 1952, OPS found that housewives had to pay 2 to 3 cents over ceiling for potatoes, and some times had to accept parsley and carrots in the tie-in sales with their potatoes. Prom Maine's Aroostook County came reports that potatoes were being shipped across the Canadian border, then shipped back into the United States lio as seed potatoes, on which there was no ceiling. J This type of evasion was widely used. ! Trade-in Allowances j A second type of evasion was used while Regulation W j was in effect. This was the "fictitious" trade-in allow- i ances used to get around the 15 per cent down payments required under consumer credit controls. By this practice dealers offered articles at the list price, but accepted old articles of nominal real value as the down payment on I the article to be purchased, leaving the buyer the real J cash price to pay off the installments in 18 months. The Federal Reserve Board laid down a set of rules as of t jSeptember 9, 1951, to halt this practice. Failure to comply i ' } < ! I j ^%ew York Times. September 30, 1951, p. 4l. ^3Time, 59:89 (March 24, 1952). 109 with the rules as defined by the Board was considered a violation, and violators were subject to $5,000 fine or one year in prison, or both. 1 1 Fancy1 1 Cuts of Meat Butchers came up with an evasive trick of their own until OPS stopped it August 30, 1951* Butchers had been making "unusual or new cuts of lamb and mutton" and sold these cuts substantially out of line with general prices for lamb. The OPS ordered their discontinuance and said that only those types of cuts that had been sold during the 44 ! general freeze period might be offered for sale. [ i Butchers by-passed OPS regulations in another way. For example, a butcher was not permitted under regulations to sell a soup-bone with suet on it. In order for the i housewife to obtain the desired bone, the butcher merely itemized the soup-bone as bone, suet and meat. Another infraction of regulations in the meat industry occurred in the form of selling horse meat as beef. It was revealed In i Chicago on January 27, 1952 by OPS Regional Director Michael J. Howlett that hoodlums had bought horse meat and mixed it with beef in the proportion of 40 per cent to 60 per cent I and sold the mixture as "hamburger." It is estimated that 44 New York Times, August 31, 1951, p. 10. 110 in a six-month period 4,500,000 pounds of this illegitimate "hamburger" was distributed in the midwest. It was also estimated that the meat cost 14 cents per pound but was sold for $1 a p o u n d . In Chicago, a butcher cut up two identical carcasses in front of an OPS inspector. Cuts from one complied with OPS regulations; cuts from the other did not, and even the 46 OPS inspector could not tell how the cheating was done. Under OPS' complicated cutting regulations, cheating was made easy. The rib and short plate of beef, for example, are contiguous parts of the animal. But under OPS ceilings, prime ribs wholesaled for more than double the price of short plate. Thus the butcher who wanted to cheat merely cut the rib large, the plate small. Another dodge: meat packers were allowed a certain shrinkage in cooling their meat but it was a simple matter to claim more shrink age than actually occurred. It was also a simple feat to rearrange the accounts to bring purchase prices down with little risk of being caught. For with retail prices sky high, black marketeers could buy their beef above OPS 47 ceilings, sell it at legal prices, and still show a profit. 45ibid.. January 28, 1952, p. 10. ^"Meat: The Showdown," Time. 58:99, November 19, 1951• 47 Loe. cit. Ill A representative of a large grocery store chain in pointing out the defects of OPS in regard to the meat situation stated that the retail prices on cuts of meat presumed that there was such a thing as a standard price differential between retail cuts. Actually, there was no such thing since consumer demands varied by season, by region, by state and even within the city. In addition, OPS set a low ceiling price on some popular cuts of meats, j 48 while other cuts had a very high ceiling. It was expected that retailers would cover their losses on the low ceiling cuts by sales of these overpriced cuts. If these were not sold, then the retailer had to absorb the j loss. Meat Packers1 Tricks I j After OPS regulations went into effect, a New York j I packer began to process about a fifth of his usual thousand head of cattle per week. Another company that previously slaughtered 20,000 head per week dropped to 9,000. This i happened because under OPS regulations, packers could not ! i buy top grades of cattle. This developed from the OPS formula itself. For example, when the Chicago market An example of a low ceiling on meat was weiners as compared with sirloin or other steaks, or T-bone with round steaks. 112 called for $3 7 -0 5 per hundred weight, this did not apply to a specific sale. It applied to a company average monthly price per hundred weight. Cattle buyers on the other hand, were able to purchase at any price they wanted to pay with no questions asked. This done, he had five basic sets of tricks that he could use. For example, (l) the packer could pick up over a $1.00 per hundred weight by making various cuts as mentioned above; (2) he could obtain favor able judgment from governmental graders and transmute good meat into choice, and choice into Prime; (3) by manipulating the allowable shrinkage between hot weight and chilled weight, it was possible to account for more animals, and fewer and fewer pounds of beef; (4) by juggling accounts, 1 it was possible for 500 prime and 300 choice to become 500 j choice and 300 prime; and (5) it was possible to operate with a total disregard of the law. Profits were high, and the OPS branches were not heavily manned (just as under 0PA); penalties were not severe; people wanted beef and were willing to pay for it. In October 1951* Stabilizer Michael DiSalle accused the meat industry of having victimized the American con- I sumer for years by sharp practices at all levels of , ^"Meat: The Price of Being Law-Abiding," Fortune, 77:174, 1951. 113 production, processing, and distribution. Michael DiSalle charged that these sharp practices were being used to destroy meat price controls. The practices that he referred to included tie-in sales, watering and feeding livestock before weighing for sale, falsified grades, and other tricks, all specified by name. Automobile “Extras” Automobile dealers also had their share of evasive tricks. Some dealers required buyers to purchase cars on an installment plan, to buy special equipment in order to i get a car and/or to trade in a used car as a requirement of i a deal. OPS put a stop to this October 15, 1951 by requir ing dealers to post charges for extra, special or optional equipment.A dealer was unable to charge for such equip- I j raent unless the purchaser requested the equipment in i writing. OPS again warned automobile dealers April 11, 1952 concerning the practice of requiring a purchaser, as a con dition of sale, to make payments over a period of time or to finance through any particular lending agency.^1 ^°New York Times, November 16, 1951, P» 15* ^Los Angeles Times, April 12, 1952, p. 16. 114 Black Markets Soon after the general price freeze in January, 1951, Michael DiSalle stated to the Joint Congressional Committee that there was not a black market in beef. Concerning a potential black market, he told the Committee that illegal dealings during the second World War had been made possible because slaughterers were not included under the freeze. This time, he indicated that they had been included and would be controlled. Michael DiSalle!s prediction did not come true. The OPS Enforcement Director Edward P. Morgan announced September 28, 1951, that 1,145 slaughtering j t plants were visited and uncovered 934 cases of beef viola- j tions with the beginning of national black market operations in Wichita, Kansas. Director Edward P. Morgan accused the concern of sending several car loads and trailer loads of beef to several eastern cities. In addition to this viola tion, evidence was uncovered of slaughter houses paying more than the prevailing price for beef on the hoof (since j OPS did not control this) and using various devices to 52 make up the extra costs. Eric Johnson, head of the Economic Stabilization Agency, pointed out on October 2, 1951 that OPS investigations of the meat industry revealed ^2Ibid., September 30, 1951, P* 4l. 115 a large percentage of the plants were committing offenses that were punishable under the weakest control laws.^ At this time, Michael V. DiSalle admitted irregularities and blackmarketing in the meat industry had reached such high proportions that he was considering President Truman's suggestion of using other Federal agencies to aid in the Cji enforcement of OPS regulations.^ As early as September 20, 1951 legitimate butchers complained to OPS concerning black market operations. 56 The OPS ceiling compliance price was $34.93 to $3 6.8 1. I Legitimate packers were forced to accept fewer animals, and I ! of a lower grade, while chiselers were snapping up most of j i the choice supplies. In a cross section study of 443 1 1 plants that were considered typical of the industry, the report revealed that the slaughtering plants had bought * 247,000, beef animals of varying grades. In 1950 the same week, pre-OPS, they had purchased 291,000. The drop added up to 15 per cent. A huge number of animals was moving to the market but the old packing house members were not 53 New York Times, October 3, 1951, P- 23. 54 Ibid.. October 7, 1951, P. 40. ^Ibid.. September 21, 1951, p. 26. 56Ibid., April 29, 1951, p. 54. 116 getting their share.^ Black market operations did not stop in 1951* On March 13, 1952, agents of the OPS found evidence of wide spread black market operations in potatoes among wholesale markets in New York City. The agents found such black market practices as overcharges for potatoesj others asked for and received under-the-counter payments in addition to I the regular price; and some dealers required the buyers to buy unwanted vegetables which the dealers failed to deliver. i j Price Mark-ups j This procedure provided a convenient legalized method to circumvent price controls. It was a common prac- ' i tice in merchandising to set the selling price of a com- j i modity by adding a customary percentage to the buying i prices. Similar practices of basing prices on direct cost plus a percentage were widespread in manufacturing. The consequences were cost increases arising from raw materials or wages were not only passed through as dollars per unit charge, but were blown up to yield the customary percentage I I I j I 57 Ibid., September 26, 1951, P» 23. 58Ibid., March 14, 1952, p. 9. 117 of gross profit.^9 in addition to this, another evasion was possible. Ceiling Price Regulation 16 provided for different mark-ups for each group of retail stores. Because of this difference in price at stores of differ ent classes, it was difficult for the consumer to determine whether or not he was being overcharged. I i Formula Pricing Procedure The procedure used in formula pricing provided a convenient route for raising the selling price of non standardized products and old products. Also, it could be I used in cases of new commodities. The price administrator ! issued a formula by which the selling price was to be com puted. This was based, for the most part, on the principle of cost plus customary mark-ups all along the line and the fin result was differential pricing in each store. Just as j was true with mark-ups, the customer was still left at a ! loss to know what the legal ceilings were in any particular store, and even in cases where prices were posted, it was not feasible for a busy customer to examine in detail for each item purchased. In many instances, particularly in j I - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - j ^Albert G. Hart, Defense Without Inflation (New ! York: Twentieth Century Fund, 1951), p. 677 fin Persia Campbell, The Consumer Interest: A Study in Consumer Economics (New York: Harper and Brothers, Pub- lishers, 1949), p. 1 5 1. 1181 early months, the shift to formula pricing meant a price increase, as in food products such as canned fruits and vegetables. This practice which was begun under OPA was continued under OPS. i Even though the intent of formula pricing was to provide a course by which profit margins of the seller would not be squeezed by uncontrollable increases in costs, it also provided the enforcement officials with an instru ment that they could not control. It was virtually impossible for any price official to check the calculations 62 ■ in each individual case. 1 Dollar and Cents Celling Procedure j This was another important way of determining price | 1 regulations. It was originally conceived as being an j 1 excellent method to not only protect the buyer but to keep profits down to a reasonable level. The great difficulty with the dollar and cents ceil- j I ing was its not being applicable to many varieties of a | 1 product; when prices vary greatly according to units sold, i kinds of services offered (for example, transportation and Campbell, loc. cit. Jules Backman, The Economics of Armament Inflation (New York: Rhinehart and Company, 195177 p. 19&* 119 packaging) with the product, location of the seller and buyer, and the like. Again, the dollar and cents ceiling, as precise as it was, often meant a higher price for the consumer.^ The price had to be set high enough to assure minimum profits to most suppliers. In the market for essential products, the authorities could not afford to eliminate a substantial part of the suppliers even if they were higher cost producers. The result was that the dollar and cents ceiling allowed large profits to low cost producers. 63 Seymour E. Harris, The Economics of Mobilization and Inflation (New York: W. ¥. Norton and Company, Inc., 1951), P- 220. ^Loc. cit. CHAPTER V THE ECONOMICS OP DIRECT PRICE CONTROLS When one considers the actual costs of price con trols, he is immediately confronted with both measurable and immeasurable items, neither of which can be fully explained. It is possible, however, to mention some of the most important costs. Among the immeasurable costs, one of \ the niost important is the role of the volunteers. During i World War II, this group played an extraordinary role in OPA. Their contributions to the success of that program were so immense that the values cannot be calculated. These volunteers came from every walk of life, professionals i and non-professionals, some came and stayed; others left; some brought considerable strength to the program; others brought little; in the end, however, they all contributed a part which actually decreased the cost of the program in j terms of dollars and cents. ! ! I. COSTS OP OPA Rationing Boards _______ The OPA called upon citizens in local communities___ 121 to administer the rationing and price controls and these volunteers constituted over 75 per cent of the OPA's staff.1 Furthermore, there were approximately 5#500 price and rationing boards throughout the country. Each was pre sided over by a volunteer board chairman, nominated from i i the community and appointed by the OPA district director. Each chairman was assisted by similarly appointed board members. In large boards the members were formed into panels, such as the gasoline panel, and the grocery panel. These board members were employees of the Federal govern- i ment serving without pay. They were given adjudicative and | enforcing powers. They issued the gasoline ration coupons and they mediated the settlement of overcharges. At the ! height of the program more than 100,000 board members administered these wartime measures. ! Functions of Workers The actual number of unpaid workers in OPA was stu pendous. These workers performed a great variety of OPA !functions. Many groups of board members undertook the task . !of informing and educating the public relative to OPA 1 ; Imogene H. Putnam, Volunteers in OPA Office of Temporary Controls. Office of Price Administration (Washington, D.C.: United States Government Printing Office, 19^7), p. 1. 122 ! i problems; thousands performed clerical duties alongside of paid workers, many issued ration books (one for each man, woman and child in the country). These and many other functions were performed by voluntary unpaid workers. In seven selected regions, it was estimated in a single monthly report that clerical volunteers alone contributed over 555*000 man hours of work. This represented only a 2 small fraction of the total hours put in by unpaid workers. Monetary Costs In addition to these volunteers in the price control( program, more tangible expenditures In terms of rationing and subsidies are commonly associated with all-out war j efforts. These controls always Involve high costs in money and manpower expended. The Chamber of Commerce of the United States i released some startling figures In 1951 on the price of I ■3 ! price controls during the OPA period. According to this ! source, subsidies alone were in the neighborhood of 5 billion dollars. Administration of price and rent controls and rationing by paid workers accounted for more than 750 j I i i ------------------------------------------------------------------- I 2 1 Putnam, loc. cit. j - a I 'The Price of Price Controls," Report of the Com mittee on Economic Policy 1951 (Washington, D.C.: Chamber of Commerce of the United States), pp. 11-13. . I 123 million dollars. The early OPA planners had envisioned a paid staff of 90,000 workers but Congress whittled down the appropriation requests to keep the OPA within bounds. Nevertheless, the figure reached 64,000 paid workers. It is of some interest to note that OPA started with an outlay of $22.4 million in the fiscal year 1942 and reached a peak expenditure of $1 8 5 .7 million in the fiscal year 1945* At no time were the funds requested by OPA granted in full by Congress. Also, in terms of manpower, it was one of the largest of the Civilian Agencies during World War II. Furthermore, it is believed that the OPA program would have j been highly Ineffectual without the help of thousands of unpaid workers on the local boards. I II. COSTS OF OPS Volunteers ! I Soon after the initiation of the OPS program, the officials in the agency requested mayors of cities to , I organize civic groups to aid in carrying out the program. I 1 These groups of citizens were to be volunteer workers in the community. A search of the available literature of government publications and elsewhere has not revealed the numbers of individuals performing these free duties. Distribution of Workers As of October 1, 1951t OPS was maintaining a national office in Washington, D.C., 14 regional offices and 89 district offices. At that time, there were 11,166 persons employed by OPS. Of this total, 2,529 were in the national office; 2 ,2 2 1 in the regional offices, and 6, 4l6 in the district offices. Included in the national office figures were 47 consultants paid only when actually 4 employed and 84 employees serving without compensation. Other costs.— The evidence that OPS mushroomed into i a sizeable agency although it was still a fledgling as compared with its predecessor (OPA) of World War II is seen by the following factors: (l) OPS had an initial control j ! over millions of businesses; (2) OPS at one time controlledj millions of products; (3) millions of consumers were con- j trolled by OPS; and (4) OPS handled thousands of transac tions. In addition, OPS personnel reached a total of over 12,000 persons. In 1952, a requested stabilization appro priation of $93 million was asked for, with the largest percentage of it slated for OPS. However, the Economic 1 1 _______________________ 1 it Michael V. DiSalle, Price Stabilization to October, 1951. A summary of operations to the Joint Committee on Defense Production of the United States Senate, United States House of Representatives, pp. 11-12. 125 Stabilization appropriation as passed by Congress totaled $62 million, of which OPS received $37 million. As a result, OPS had to eliminate 13 of 103 field offices, and reduced its staff to 5850 employees.-* Additional work.— In addition to direct costs of price controls, there were numerous immeasurable costs, for example, costs to business and industry in the form of additional work in order to comply with the great number of regulations of wage and price controls. Many firms found it necessary to hire additional labor in their accounting and clerical departments to handle the extra work load. Numerous man-hours were lost in the added paper work. Provisions for added costs.— Business after business * 1 1 ■ 11 1 1 ■ 1 " ■ 1 11 1 j complained to OPS concerning the increasing costs of com plying with the large number of regulations and these costs were not allowed in determining the ceiling price under the original celling price regulations. For example, one company complained that its costs had risen 100 per cent following Korea. Another small business had to employ 1^ j additional persons to its clerical staff to handle price I I control regulations. ! -*0PS: Advanced News Release, July 18, 1952. 126 Skilled labor often required.— Often the numerous reports necessitated more elaborate statistical methods and accounting than was normally used by small businesses. This required the employment of skilled persons. Fre quently this added expense was too great to be borne by the small business owner. Then, too, the added work load required for compliance meant either the small business had to add to the work load of the employees or hire additional persons to the staff. This obviously added to the overhead costs of the establishment. Many small businesses were unable to absorb these additional expenses. I I i III. EFFECTS OF PRICE CONTROLS i i Role in Economic Stabilization Price controls affect the economy in numerous ways. Some of these effects are beneficial, others tend to destroy the very objective that they are designed to preserve, I namely, stabilization. It is recognized, however, that | i price controls are but one aspect of a broader program to ; bring about economic stabilization. Other aspects are i i wage controls, allocation of materials, priorities on pro- | duction, increased taxes, and credit controls. i 127 Effects on Manufacturing The Chamber of Commerce of the United States pub lished the fact that there were some 4 million separate business establishments producing 8 million different items. Some companies were reported to produce more than 200,000 different articles. Manufacturers changed their products from time to time in attempting to improve them. Frequently these changes were accompanied by an increase in production costs. Pricing regulations did not allow imme diately for the increment in cost. Consequently, the manufacturer was placed between the selling price and the cost. When price control did not allow prices to guide production, the latter was curtailed. Effects on Meat Production When the United States Army tried to buy 13 million pounds of beef late in September 1951# & H major United States packers refused the business. Only two small com panies submitted bids for a mere 190,000 pounds. With the Army's meat running low, they decided that they would try to find meat overseas. The A.F.L. Meat Cutters' Union put "Price of Price Controls," o£. cit., p. 17. 128 7 the blame squarely on price controls. Wilson and Company threatened to close its slaughter ing plants one week each month, the Koblenzer packing house slaughtered only 7^0 heads during the month of* September, 1951 at a loss of $6,700. The paradox of the situation was that the United States was short on meat when it had more beef on hoof than at any time in its history. The I previous alltime peak had been in 19^5 with 8 5,5 7 3 ,0 0 0 head. The estimated number by the end of 1951 was over 90,000,000. Yet because of OPS snarls fewer cattle were being slaughtered than during the corresponding period of 1 i the previous year and despite the record meat prices, j packers who traditionally made one cent on every dollar j sale, were hardly able to break even (Armour lost $l,600,000j . 8 ! in the quarter, May to August, 1 9 5 1). I 1 i The main trouble with OPS was that it had put ceil ings on every form of beef except the live animal. Since there was no way to set such a ceiling (it is impossible to grade before slaughtering) livestock prices went right I Q ! on climbing.^ j ^"Needed: A Free Market," Time, 5 8:8 7 -8 8 (October 1, 1951). ®Loc. cit. q 1 ■'Xoc. cit. j 129 Perpetuation of Controls on Non-scarce Items In May, 1952, Price Stabilizer Ellis Arnall author ized 3 5 0 ,0 0 0 retail grocers to boost their ceilings about a penny each on hundreds of food items. The increase meant that the public food bill would increase from $100,0 0 0 ,0 0 0 to $150,000,000 per year. More than 50 per cent of all these food items had been selling below ceilings. One official of OPS stated that the increase was necessary to keep grocers' earnings at a fair level. The OPS offered no proof of definite scarcity. Another example of price controls being perpetuated on non-scarce articles is seen from the fact that ceilings were held on whiskey until 1 10 1 June 23, 1952. Whiskey controls were maintained for a 1 long time even though the selling price had dropped 30 to 47 per cent below ceiling at the distillery and there was an 8 year supply over demand in distillers' warehouses. 11 A similar example of this occurred in the textile industry. 1 * ~ I The latter industry had spent 6 of the past 11 years under first one regulation and then another. It was known at least as early as January, 1952 that the supply of textiles had reached one of its highest market peaks, yet decontrol ! 10 OPS: Advanced News Release, June 24, 1952. ^^Loc. cit. 130 did not occur in this industry until June, 1952. Between 1944 and 1952, the Agriculture Department spent more than half a billion dollars trying to keep up the price of potatoes. The department burned them, gave them away, let them rot, and tried dozens of other schemes of destruction. Finally Congress forced the Agriculture Department to give up (1951) and let the law of supply and demand take over. As supply decreased, demand increased, and the price of potatoes more than doubled. Then the government decided the price of potatoes was too high. It | had reached more than 105 per cent of parity so Michael V. j DiSalle rolled back potato prices 5 to 26 per cent at farm 1 12 ' and wholesale prices. 1 iWaste and Distortion of Production Price controls cause waste and distortion of produc tion in a number of ways. One way that waste occurs is in the form of money. Representative Oakley Hunter investi- J gated the Office of Price Stabilization's price testing Icenter in Fresno. He announced March 17, 1952 that the ! 1 Fresno office had an annual payroll of 46 permanent employ- j 'ees plus three executives yet to be filled in the amount of ! 12Time, 59:84 (January 14, 1952). 131 $243,000. Fresno represented only one of three cities where the price testing plan was tried.^ • ^Los Angeles Times, March 18, 1952, p. 6, pt. 2. CHAPTER VI DIRECT PRICE AND FISCAL-MONETARY CONTROLS * Within the past few years the question has arisen concerning the mechanism by which scarce commodities are to be allocated during periods of war, or when there is an j acute shortage of certain commodities. Coupled with this ] question are those of stabilizing ascending prices and those of reducing or eliminating the companion problem of ! inflation. Essentially three primary suggestions or policies have been brought forward to cope with these difficult questions. All of these methods have ardent supporters ! that have presented strong arguments for their adoption. The suggested policies of controlling the economy are: direct controls, fiscal-monetary controls, and a combina tion of direct and fiscal-monetary controls. I I. THE DIRECT PRICE CONTROL POLICY I i Aims of the Policy Direct price controls were tried during World War I, 133 World War II, and again during the Korean conflict. Recently it has been referred to as the disequilibrium system and its aims have been defined as not seeking to i maintain equilibrium over the entire economy or any of its broad sectors. Instead its purpose is to maintain a very l large excess of disposable income over permissible consump-j tion at stable prices.1 The rapid accumulation of consumer! I savings, and corporate savings as well, take the form of 2 whatever liquid assets the public prefers. i The-Need for Direct Price Controls j I Lester V. Chandler has presented strong arguments i for the need of direct price controls during periods of ' j | economic stress. His arguments were centered around two j j points: (l) that inflationary pressures could not be 1 l i {removed by restrictive fiscal and monetary policies during . i periods of mobilization so that there would be a need at j that time for direct price controls; and (2) that the prob-j i lem of inflation during mobilization is not of short dura- j J o i tion, hence, direct controls would be necessary. He | \ : ! | -^■Edward S. Shaw and Lorie Tarshis, "A Program for ■ Economic Mobilization,n American Economic Review, 41:34, 1951. ^Loc. cit. ^Lester V. Chandler, "Direct Controls Over the Price of Non-Cost-of-Living Items,r l American Economic .Review, 41:67, March, 1951.____________ ______________________ — believed that the duration of a defense program would cause a sharp inflationary impact on those industries producing and using metals, fuels, rubber, chemicals and similar commodities. If the government should fail to place a ceiling on the price of commodities used by the govern ment, price increases would occur in those areas and gen erate inflationary pressures that would spread throughout the economy, including consumer goods. Effects on Production Rates and Prices I It has been reported that direct price controls j I (l) do not only result in a price decline but also in an ! output increase; (2) production rates are not increased * ■ i (nor is production increased) following the relaxation of controls; and (3) free competition is not the exclusive : ! 6 ’ !alternate for regulation. j t 1 Economists who insist the latter of these three statements is false are considered by M. Bronfenbrenner to be in error and when the third statement is eliminated the 7 1 second fails to hold.' No argument was presented to ; i i | 4Ibid.. p. 68. | i ^Loc. cit. f Z M. Bronf enbrenner, ’ ’Price Controls Under Imperfect Competition,” American Economic Review. 37*107, 19^7. ^Loc. cit. | 135 substantiate the first of these statements. Peak Mobilization It is generally believed that under extensive and rapid mobilization programs, direct controls and rationing of key commodities are the best methods to obtain results 8 and hence are to be preferred over indirect methods. One important reason for this belief is the market competition between civilian demands and those of the military. ! Familiarity of the System A very strong argument for direct controls is that Q the formula pricing system is familiar. Since it was used during World War II, it can be quickly and efficiently reassembled from the blueprints of that period. Public Sanction Many persons believe that an excess profits tax is right, ethical, and the best way to take the profits out of war."^ Such a procedure has been used with direct price controls. "The public approves its apparatus of Q Arthur Smithies, "The Economics of Preparedness for War. Fiscal Aspects of Preparedness for War," American Economic Review, 39:361, 19^9 ♦ ^Shaw and Tarshis, loc. cit. 1(^Loc. cit. 136 1 ceilings and freezes, likes the simple equity of formal rationing.n Accumulation of Liquid Assets I The accumulation of liquid assets provides an | i incentive, as tax receipts, as Illiquid savings may not, j : to offset the inevitable reduction in current real consump tion. If the price line is held, labor may be persuaded 12 to moderate Its wage demands. Direct Price Controls Fail to Prevent Inflation j I Eventually, the disequilibrium system can be counted; upon to culminate in some price inflation and sufficient : i ; I j forced savings to ease the burden of public debt and over- ! < 1 1 come the danger of post-crisis deflation. i j | : Direct price controls did not prevent excess demands j !from appearing and the result in some cases was outright inflation. In some cases inflation was more subtle and ! I took the guise of quality deterioration, withdrawal of low- . iend items, over-fabrication and sub rosa bonus arrangements! ' l from buyers to sellers.^3 ; i 1 i . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — i 1]"Shaw -and Tarshis, loc. cit. | 12 I Ibid., p. 35. j ■^Loc. cit. 1 137 Another serious problem connected with inflation is that once it gains headway, the opportunity to earn liquid I assets probably will not attract an adequate labor force or| 1 4 i stimulate an aggregate or pattern of capital formation. j Postwar Problems J i Direct controls create postwar problems in the form ! i of inflation, the emasculation of monetary controls, and j the inequitable accumulation of wealth. The latter is i i always a matter of great public concern. i ! Allocation of Resources J Direct controls can hamper the allocation of | i resources and output even if prices hold. This may be seen ! in several ways. Excess demands on normal civilian markets i 1 jdiscourage diversion of resources to military output. New i I investment for military markets is handicapped when there i is a persistent buyer’s market for civilian output. Since relative intensities of consumer demands are concealed by frozen prices, consumer wants can play no direct role in i ,determining which resources should be surrendered to i . i [rearmament. The pattern of civilian output does not ; I ' Ireflect relative intensities of consumer demands, but j i l4Ibid.. p. 3 6. 1381 instead relative mark-ups that are permissible under price ; control regulation.^ Inflexibility of Direct Price Controls Perhaps one of the greatest disadvantages of direct price controls stems from its administrative apparatus. i "Its administrative apparatus is cumbersome, tightly cen- f . I tralized and inflexible." i i The many directives, pamphlets and other written j materials sent out from Washington during World War II j I serve to illustrate this centralization. All localities ! i i were treated essentially the same, with no differences i being made for the area, and yet all localities were not the same economically. Subsidies as an Adjunct to Direct Price Controls ; I Some economists believe that prices can advantageous-i i ly be kept down or reduced by payment of subsidies out of ! i money raised by taxes, and especially on the claim that the j expense of the subsidies to the taxpayers will be less than; the gain to the consumer in lower prices. ^ j ■^shaw and Tarshis, loc. cit. l6Ibid.. p. 37. J ^Harry Gunnison Brown, "Cost of Production, Price iControls and Subsidies: An Economic Nightmare," American j Economic Review. 42:126, 1952. 139 That subsidies do not always function as they are designed can be drawn not only from the experience of the United States in the use of them but from Canada as well. (The Canadian plan of subsidy was a well-planned design to : 'pay producers for the purpose of keeping the cost of living I j I | 18 down, and still consumer prices continued to rise. j t Parity as an Adjunct to Direct Price Controls j i ! j One of the most serious problems arose at the out break of the Korean conflict in the form of the parity pro gram. The Defense Production Act contained a provision that I I no ceiling was to be placed on farm products until parity |was reached. The farmers were the only group of citizens I I that were given gilt-edged security under the Defense Pro- ; i ! duction Act in the guise of parity. As the latter was | originally conceived (or at least in theory) parity was j t _ i intended to maintain a fair relationship between the prices j received by the farmer and those he must pay, and the law ; Lssumed that the right relationship was the one that pre- j vailed between 1910 and 1914. As was further pointed out S iq ; In Fortune. y the reason parity was originally conceived was; 1 ! J __________________________________ i ! -^Raymond F. Mikesell and C. Edward Galbraith, j "Subsidies and Price Control," American Economic Review, I 34:524, 1942. J "^"The Parity Outrage," Fortune, 43:77-79# April, 1951. I 140 for* a balance between farm products and the difference in industrial products that the farmer consumed. In parity the cost side of the equation included food, tobacco, clothing, household furnishings, house j I J , 'building materials, the price of a farmer's car (up to a j Buick Special), the cost of commodities used in production j (seed, feed, fertilizer, farm machinery, building, fencing)j t as well as interest on farm real estate, and the cost of ! hired farm labor. The inclusion of such items as hired labor permitted the farmer to "jack up” the index on the j ! cost side of the parity equation, thus raising the floor under farm prices. Furthermore, the actual computation of parity prices for many of the basic farm commodities was ; j first under an ’ ’old” formula and then a ’ ’new" formula, and j the one that yielded the higher price controlled. 1 i ; Rationing as an Accompaniment of Direct Price Controls Rationing has been used to allocate scarce commodi- ] ties on the pretext that it should be done because it is !practical to do so, e.g., it has been said that the price | f ,system is too cumbersome, and that it inflicts hardships i 20 1 Jand injustices upon the poor. ; i ; _ _ _ _ _ _ _ _ _ 1 20 I i M. ¥. Reder, "Welfare Economics and Rationing," I |Quarterly Journal of Economics, 57:153. 1942. j j ' t A fundamental difficulty with administrative ration ing is that equal allotments do not result in an equal Pi I treatment or an equal sacrifice. This is best illus- j ! trated in the case of gasoline and tire rationing during : the OPA era. Varying quantities were allowed different classes of consumers. No administrative board, however, 1 could appraise the merits of claims for allotments above ! i the minimum, nor could it control the disposition of the j commodity once it had been allotted. Consequently, some individuals obtained more than their share of rationed j commodities. | Miscellaneous Objections Several miscellaneous objections to direct price- , controls may be listed as follows: (l) at no time was a ; I satisfactory control exerted over farm prices; consequently,' j the raw products from which food and clothing were made J contributed to the price spiral; (2) wages were not effec tively controlled; and (3) the bottlenecks that often occurred in defense orders were reflected in a decrease in 1 production of civilian commodities. 2^W. Allen Wallis, ' ’How to Ration Consumer Goods and | Control Their Prices," American Economic Review, 32:502, ! 1942. I II. FISCAL-MONETARY CONTROLS Statement of Policy The fiscal-monetary policy is an indirect method 1 i of closing the inflationary gap and has the support of many! I economists. It has been described in the literature under ! op ' such terms as the "cash-and-carry program," "pay-as-you- j f i 23 * go program," and as the fiscal-monetary program by numer- ious economic writers. I The policy employed in this method is to cut down j j private expenditures by fiscal and monetary measures, such as higher taxes and compulsory savings supplemented by higher interest rates. It has been stated that such a policy is aimed at restricting civilian demands through . i 'taxation and monetary policy and transferring materials and ! i ;labor to the government through price and wage mechanisms. | Furthermore, this type of program would not be feasible unless it involved substantial increases in individual i I prices and wages and consequently in the general price and ! 1 24 i wage level. If fiscal and monetary policy were to make I : j 22 Wytze Gorter and George Hildebrand, "Is Price Control Really Necessary?" American Economic Review, 4l:77, |1951. ! I 23 ! ! Shaw and Tarshis, o£. cit., p. 37. ] I 24 l ! __________Smithies ,._ op..__cit . p . . . 363 . i 143 possible the transfer of resources with no such increase, J I it would be necessary to rely entirely on income effects | on demand to obtain the necessary release of particular resources; and the demand for goods unrelated to defense would have to be reduced alone with the demand for those needed for the military program. If the government can use fiscal and monetary policy freely, it can produce both income and substitution effects on demand. If that is done, fiscal and monetary policy need only produce the required aggregate reduction in civilian demand.2^ The Advantages of a Fiscal-Monetary Policy Closing the Inflationary Gap | During wartime, the amount of money that consumers ; I have and try to spend exceeds the amount of goods and , services available. The excess, or “inflationary gap" J 26 causes a general rise in the level of prices. Obviously,j 1 1 some method must be devised to eliminate, or at least arrest this condition. Apparently the solution to this phase of the problem lies in a system of taxation. A [ heavy income tax on civilians will invoke a general con- i I traction on civilian demands. Also, with prices free to l : ---------------- I | 1 25 I i Smithies, loc. cit. j - - - - I 2 Wallis, loc. cit. 144 move up and down, the reaction of entrepreneurs and workers will lead them to do precisely what the preparedness pro gram requires. For example, the sharp fall in demand for consumer durable goods coupled with a parallel growth for the military output of the industries will furnish them with adequate incentives to convert to military produc tion.2^ It appears likely that industries that have convert ed, or those actively engaged in the production of war goods would benefit by increased profits. Herein again this would be adjusted through the tax system. The fiscal- monetary policy would permit the government to allow industry to charge the prices that are required to get the j i desired allocation of resources, but would hold profits { 281 down to an acceptable level by a system of selective tax. ; i I Efficiency during mild mobilization.— In an emer- 1 1 gency that required only limited mobilization so as to 1 1 engage only a limited part of the country’s economic j I 1 activity, complete and rigid controls might impose hamper- j ing restrictions more damaging to the economy than would be; 1 warranted by the gains for special purposes of the j i ----------------------------------------------------------------------------- I 27 1 Gorter and Hildebrand, o£. cit., p. 78. 28 Smithies, op. cit., p. 364. 145 emergency. During a mild mobilization of long duration, say of 5 to 20 years, it could best be dealt with by normal methods of a free price system and a minimum allocation of materials. Maximum efficiency would require freedom of operation of the economy with self-aligning adjustments in response to changing needs. The scope of the price control program as was attempted during World War II was too broad to operate efficiently. It has been stated that this was the most extensive step in the history of price controls in this country. The regulations applied to all levels, manufac turing, wholesale and retail and covered every commodity, i both domestic and imported, not covered by a separate i regulation or specifically excluded. Control was extended ! to about 60 per cent of the food budget, to most other retail sales, and to more than three-fourths of manufac turing and wholesale trade. 29 David L. Wickens, 1 1 Proceedings on Economic Mobilization Short of War,” American Economic Review, 41:74, 1-951. •a@ Don D. Humphrey, "Price Controls in Outline," American Economic Review, 32:748, 1942. 146 Flexibility of the system.— The fiscal-monetary policy is a flexible s ’ ystem, since taxes and interest rates or capital rations and saving quotas can be raised or 31 lowered as the need to do so arises. This is in direct contrast to the inflexibility of direct price controls that must make at least two fundamental assumptions: (l) con sumer expenditure and therefore the level of prices con sumers pay cannot logically be forecast on the basis of past relation between consumer expenditure and total individual income, because total individual income is dependent on price, which is the thing to be forecast; and i (2) that even if the relation was independent of price, it } | could not be used to forecast prices during wartime or periods of rapid growth in individual income because the > relation is unstable at such times.^ If consumers expenditures and prices cannot be predetermined, then, during periods of economic stress, the flexibility that is inherent In the fiscal-monetary policy would be the most j desirable at these times. 31 Shaw and Tarshis, o£. cit.. p. 37. 32 Jacob L. Mosak and Walter S. Salant, "Income, Money and Prices in Wartime,’ 1 American Economic Review, 34:828, 1942. 147 Distribution of commodities.— Under a fiscal- monetary program commodities move easily, simply, and evenly. The rate of movement of any commodity during peacetime has always been determined by the desire for the article, need, desire to use substitutes, and the price the consumer would pay and these same factors would operate in wartime. In a study of wartime behavior of prices, it was found that the behavior was consistent with those of pre- 33 war patterns. Therefore* cost may not be the problem. Under the free price system arbitrary distribution of goods is eliminated. Consumers may have a restricted j range of commodities from which to choose, but would be free to select their own combination of commodities. Administrative 1 1 bungling" avoided.— The fiscal- monetary program may be the most expedient course to follow since administrative bungling is avoided, manpower is con served, and the wishes of the consumer are expressed. However, the wishes of the consumer may not be in total i agreement with the needs of the mobilization program at | i any given time, nor in agreement with the business condi tions under consideration. G. L. Bach wrote that: Jules Backman, "Price Inflexibility— War and Post War," Journal of Political Economy, 56:432, 1948. _ _ . Even if cyclical business fluctuations did occur, the tax rates and the government spending on goods and services would be left untouched, except for the periodic adjustments to allow for changes in the proportion of its real income that society wants to channel through government.34 s Bach's conclusion, however, is subject to some debate. Resource allocation.— With the inflationary gap closed, some economists believe that the fiscal-monetary policy would rely mainly on the functioning of the price system to allocate resources, and this allocation would be i no worse than that which is achieved by the pricing system i itself.25 others believe that the fiscal-monetary policy would fail to provide the minimum resource allocation needed to meet even a limited mobilization program. Disadvantages of the Fiscal-Monetary Controls [ i The fiscal-monetary policy has at least four serious ' objections: (l) high levels of taxation; (2) slowness in readjustment after the mobilization period; (3) the effects t on business; and (4) destruction of incentives. Tax rates.— One of the principal objections to the fiscal-monetary policy is its high level of tax rates. It 2^G. L. Bach, "Monetary-Fiscal Policy Reconsidered," j |Journal of Political Economy, 57*391# 1949* j 25sliaw and Tarshis, o£. cit., p. 36. 149 was stated that: Even at moderate levels of mobilization, marginal rates of income taxation would have to be prohibitive ly high to keep disposable income on a line with permissible consumption at stable prices. At peak mobilization, the average tax rate would have to be 60 per cent of personal income. To prevent excessive inequality in consumption out of income alone, the marginal rate would need to be about 98 per cent for the top decile of income recipients and over 90 per cent for the sixth to the ninth deciles. It would range from 50 per cent to 78 per cent for the third to the fifth deciles. However, it is clear that, even at this level of taxation, consumption would be distributed so inequitably as to endanger the war effort. The reason is that consumers in high-income brackets now have enough liquid assets, and access to still more, to defend living standards against j virtually confiscatory income taxation. Families in the top decile who now hold about $45 billions in liquid assets, could consume- at their present levels for a year or so even if taxes did take all of their income. Their spending would inflate price levels, and worse still give rise to a ^ gravely inequitable distribution of real consumption.-5 If the preceding data are accepted, it is apparent that the fiscal-monetary policy alone could not be depended] on to finance a mobilization program. Furthermore, it is commonly known that mobilization programs are not financed by taxation alone. Slowness in adjustment.— Regardless of the level of mobilization, the fiscal-monetary system has the disadvan tage that it would not be able to bring about speedy 36Ibid., p. 38. j 150 adjustments to changed conditions and requirements that are necessary during mobilization. One reason for this is its reliance on the pricing system alone for the organiza tion and production. The market mechanism takes time in effecting adjustments to change in supply and demand. In fact, the slowness of the market mechanism was the main argument advanced in World War II in favor of direct con trols. A second reason why the fiscal-monetary system would be too slow to keep step with the fast changing requirements of mobilization is the almost inevitable lag of tax assessments and collections behind the level of spending.37 Effects on business.— High taxes on business profits, especially when they attain the levels during World War II, make businessmen careless of their costs. During the years 19^3 through 19^5, corporations were subject to a tax of 95 per cent on their, ’ ’excess" profits. However, a post war credit of 10 per cent reduced the effective rate of tax on such profits to 8 5 .5 per cent. During the same period "normal" profits were taxed at a 40 per cent rate.3o 37 Tibor Scitovsky, Edward Shaw, and Lorie Tarshis, Mobilizing Resources for War (New York: McGraw-Hill Book Company, 1951), P* 139* 38 E. Gordon Keith, "Repercussions of the Tax System on Business.” Fiscal Policies and the American Economy. Ch. VII, edited by: Kenyon E. Poole (New York: Prentice- LHall.,_lnc-.-,-1951-)-,-p— 3^0----------------------------------- 151 If the government were to take 80 per cent or more of each dollar earned, it would be equally true that the government would pay 80 per cent of each dollar of deduc tible expenditure. Moreover, if taxes were believed to be temporary (as was true during World War I and World War II)} It would be to the advantage of the business firm to increase any current deductible expenditures that could be expected to increase income in the future. During World War II, many corporations subject to excess profits tax fo^nd it expedient to increase advertising outlays, acquire ' i emergency facilities that could be written off for tax ! i purposes in 5 years, and overmaintain their properties.39 ! ! If the government wishes to fight inflation, there ! are a number of fiscal weapons that it has at its I command. Of these, increased taxation is potentially the most effective, but it is also the most unde sirable in important respects, so that it should be considered only when other possible weapons are inadequate or threaten worse evils. Reductions in Treasury outlays rank next in potential effective ness; but their use also may be drastically limited by conflicts of goals. Other weapons, such as tax shifts and debt operations, offer much more limited possibilities (except for compulsory borrowing, which is virtually taxation). When debt operations are involved, complementary banking operations must be undertaken.^0 ^Keith, loc. cit. j . _ r Henry M. Oliver, "Fiscal Policy Employment, and the Price Level." Fiscal Policies and the American Economy, Ch. Ill, Edited by Kenyon E. Poole (New York: Prentice-Hall Inc., 1951), P- 139. 152 Destruction of incentives.— One of the most persis tent allegations made by opponents of the pay-as-you-go plan is that any increase in taxes for any purpose has an adverse effect upon incentives. Recently, these allega tions have been investigated by the use of comparative ill statistical methods. According to these findings: (l) there is no basis for the general assumption that has been made that increases in taxation will result in a decrease in working hours by the public; (2) an increase (decrease) in the average rate of tax, leaving the marginal rate unchanged will increase (diminish) hours of work; and (3) the effect of inflation on hours of work cannot be lip determined on the basis of the utility function. III. DIRECT PRICE-FISCAL-MONETARY CONTROLS Dual Policy There exists among economists a group that neither adheres strictly to direct price controls, nor do they j I believe in a unitary policy of fiscal-monetary controls. j These middle-of-the-road economists advocate a part of each; 4i Gershon Cooper, "Taxation and Incentive in Mobilization,1 1 Quarterly Journal of Economics, 66:43-66, 1952. h o Ibid., p. 63. 153 plan, and therefore, believe that the two policies should be incorporated. The Necessity for Fiscal-Monetary Controls It has been suggested that fiscal-monetary controls are better than direct price controls whenever there is an upward pressure on prices of goods in general, resulting primarily from rising money incomes.^3 j Robert R. Moss has presented a negative argument for the fiscal-monetary policy. He believed if there were an accumulation of inflationary pressures and they were suppressed by all-embracing direct controls, an explosive i situation could develop that would necessitate perpetua tion of these controls for an indefinite period following ii . iL I the emergency. The resulting expansion of the national j | debt relative to the national income would lead to even i I greater pressure on the monetary authorities to maintain a low interest rate structure with the concomitant monetary ease in order to keep the debt burden within bounds and to prevent government bonds from breaking through par on the i ^Gardner Ackley, "The Relation of Price and Production Controls," American Economic Review, 41:70, 1951* I l I l f 1 i Robert R. Moss, Proceedings on Economic Mobilization Short of War," American Economic Review. 41:75, 1951. 154 45 down side. Need for Direct Controls Considerable argument has been offered for direct controls. Whenever there is a sharp rise in strategic goods, direct price controls would discourage consumption of the scarce goods, and encourage the maximum transfer of resources to their production. Furthermore, "rising prices not only fail to provide satisfactory distribution of what is produced, but beyond some point lose any efficiency in attracting added resources in the production of these ..46 I goods. The opinion has been expressed that direct controls are "more feasible for durable goods and industrial materials than for food and clothing and materials from which they are made." For the latter, "reduction by demand 4 7 i by fiscal policy is without argument, the best device." j Another argument for direct price controls is the i usual one with regard to its being a method by which large J scale mobilization can best proceed, and price spiraling ^%oss, loc. cit. 46 Ackley, o£. cit., p. 71. ^Richard B. Heflebower, "Proceedings on Economic Mobilization Short of War," American Economic Review, 41:73, 1951. 155 can be more quickly checked through the freeze technique. In addition to these is the fact that direct price controls tend to hold hoarding to a minimum. Criticisms of the Unitary Fiscal-Monetary-Policy It is generally admitted that sharp advances in the cost of living would occur under the fiscal-monetary policy. Under the wage policy of reflecting the cost of living in basic wage rate adjustments; wages as costs and incomes would advance significantly. As costs, they would upset the stabilization of prices of non-consumer goods. As incomes, they would cause further tax advances and pull up the demand-determined prices of important consumer goods. 48 Heflebower, loc. cit. CHAPTER VII SUMMARY AND CONCLUSIONS I. SUMMARY Two wars disturbed the American economy between 1942-1952. These disturbances were in the form of rising prices of consumer commodities, shortages in civilian goods, and increasing costs of rents and real property. If these conditions had been permitted to go unabated, they ; would not only have seriously impaired the mobilization or ! war effort, but would have been detrimental to the postwar economy. The preceding considerations made it necessary to stabilize the economy during the war years between 1942- j 1952. 1 II. EFFECTS OF MOBILIZATION ON THE ECONOMY Factors Producing Economic Disturbances During Mobilization Three factors contributing to economic disturbances brought about by rapidly expanding mobilization and full scale war were: (1) inflationary pressures; (2) increase in consumer buying power; and (3) increase in conversion 157 of raw products from civilian to military goods. Inf1ationary pressures.— Inflationary pressures were generated because of a number of factors. The most important were: (l) money expansion and bank credit; (2) anticipatory buying and speculation by the public; (3) the reduction in overseas shipment; (4) various types of transportation problems; (3) Government policies toward certain groups; and (6) the absolute price of imported goods. i Increase in consumer buying power.— The increase in private money incomes resulted from: (l) increment in the number of persons becoming employed; (2) additional over time pay for the employed; and (3) the lucrative pay in war industries. Increase in conversion of raw materials from civilian to military goods.— The demand of the military for raw materials was high, especially for the metals. This meant that fewer metals were available for civilian goods. The manner in which the military bought was also ! important. Frequently the military bought huge quantities 1 i ! of products that could have been purchased in smaller lots j j over a longer period of time. These factors contributed J to consumer shortages. 158 III. GOVERNMENT STABILIZATION PROGRAMS The Government stabilization programs as practiced in the United States between 1942-1952 were carried out by the Office of Price Administration (OPA) and by the Office of Price Stabilization (OPS). The Office of Price Administration The OPA was established August 28, 1941, and was given statutory powers when President Franklin D. Roosevelt signed the Emergency Control Act, January 30, 1942. j i Aims of the Act.— The purposes of the act were: (l) stabilization of prices; (2) protection of defense | i appropriations against dissipation by excessive prices; (3) protection of persons having fixed incomes against undue impairment of their living standards; (4) securing adequate production of commodities and facilities; and (5) prevention of postwar collapse of values. * I The Office of Price Stabilization ! i Following the outbreak of the Korean War, President j j Harry S. Truman was given power by Congress on September 1,! i < ' 1950, through the Defense Production Act of 1950> to impose, j 1 a general ceiling on the prices of individual goods. 159 Aims of the Act.— The objectives of the Act were to: (l) provide the President with power to carry out certain regulations in the economy; (2) use the power of the Act to promote national defense; and (3) use the power of the Act to prevent undue pressures on prices and wages. Legislative Creation of QPA and OPS - The legislation giving rise to OPA and OPS is remarkably similar. The Defense Production Act of 1950# and the General Maximum Price Regulation of 19^2 contained I provisions for the right to protest regulations, the duties j I of the Emergency Court of Appeals, the authority of the i Supreme Court to review the findings of the Emergency ! I Court of Appeals, and the treble damage clause. ■ Success of OPA and OPS Both the OPA and OPS had mediocre success. This was due to a number of reasons but one of the most important was neither agency was sufficiently strong to prevent evasions from occurring. Evasions were common because of: (l) the regulations provided methods for escaping their i i intent; (2) black markets were possible with limited risks; ! (3) there were few enforcement agents; and (*!■) the mass accumulation of regulations with their technical terminol- j i ogy frequently led to nonconformance. ! 160 Another indication that OPA and OPS were only moderately successful is evidenced by the fact that neither agency prevented prices of consumer commodities from ris ing. Probably the greatest success of OPA was achieved in rent control. Costs of OPA and OPS The absolute costs of the stabilization programs cannot be determined. Thousands of persons contributed free services to each of the stabilization agencies. Millions of dollars were spent. In addition, other costs j Included the impact OPA and OPS had on business in the f form of production waste and distortion, and increased J overhead. Piseal-Monetary Controls The fiscal-monetary policy is an indirect method that has found favor among many economists. i Aims of the method.— The purpose of the fiscal- j monetary policy is to cut down private expenditures by fiscal and monetary measures. i The advantages of the fiscal-monetary policy.— i Several advantages have been reported for the fiscal- 1 i monetary system as: (l) the rapidity with which it closes 161 "inflationary gap"; (2) its efficiency during mild mobili zation; (3) its flexibility; and (4-) its elimination of considerable administrative machinery. Disadvantages of the fiscal-monetary policy.--The fiscal-monetary policy has at least four objections: (l) high levels of -taxation; (2) slowness in reconversion after mobilization; (3) the effect on business; and (4) destruction of incentives. IV. CONCLUSIONS i 1. The intervention of the government into the j economy through direct price controls introduces problems j in the form of various types of restrictions, increases in taxation, impedes the operation of supply and demand, f 'interferes with the normal functioning of American free enterprise system, and brings forth other undesirable j i complications. i 2. Direct price controls Introduce postwar problems , in the form of inflation, the emasculation of monetary I controls, and an inequitable accumulation of wealth. * i 3. The price control legislation (Emergency Control Act of 1942, and the Defense Production Act of 1950) failed to accomplish the aims as stated in the respective Acts. 162 H-. The fiscal-monetary policy has inherent in it certain desirable and undesirable features; this is equally true of the direct control policy. 5. A combination of the desirable features of the fiscal-monetary and those of the direct control policy would present the most favorable system of stabilization during periods of mobilization or war. 6. Government participation in the economy is undesirable and if possible its extent ought to be at a minimum. i ; B I B L I O G R A P H Y i i i i BIBLIOGRAPHY A. BOOKS Auerbach, Alfred, OPA and Its Pricing Policies. New York: Fairchild Publishing Company^ 1944. 153 PP- Bachman, Jules, The Economics of Armament Inflation. New York: Rhinehart and Company, Inc., 1951"! 2^4 pp. _______ et al, War and Defense Economics. New York: Rhinehart and Company, Inc., 1951* 458 PP. Campbell, Persia, The Consumer Interest: A Study in Consumer Economics. New York: Harper and Brothers Publishers^ 1949. 660 pp. Chandler, Lester V. H., and Donald H. Wallace, Economic ! Mobilization and Stabilization. New York: Henry Holt and Company, 1951” blO pp. j t DiSalle, Michael V., Price Stabilization to Date. Memorandum submitted to the Committees on Banking and Currency, United States Senate, United States House of ■ Representatives. Washington, D.C.: United States Government Printing Office, 1951. 17 PP. _______ , Price Stabilization to October, 1951. A summary of operations by DiSalle to "the JointCommittee on Defense Production of the United States Senate, United States House of Representatives. Washington, D.C.: United States Government Printing Office, 1951. 17 PP. Harris, Seymour E., The Economics of Mobilization and Inflation. New York: W. W. Norton and Company, Inc., 1951. 308 pp. J^'^Hart, Albert G., Defense Without Inflation. New York: Twenty Century Fund, 1951. 186 pp. 4l S 165 art, John A., The Beginning of OPA. Part II. The Price Stabilization Division, Historical Reports on War Administration, Office of Temporary Controls, Office of Price Administration, Washington, D.C.: United States Government Printing Office, 1947* 246 pp. Keith, E. Gordon, "Repercussions of the Tax System on Business," Ch. VII, Fiscal Policies and the American Economy. Edited by: Kenyon ! e. Poole. New York: Prentice-Hall, Inc., 1951- 468 PP- Mansfield, Harvey C., A Short History of OPA. Office of Temporary Controls, Office of Price Administration, Washington. D.C.: United States Government Printing Office, 1947. 318 pp. Oliver, Henry M., "Fiscal Policy, Employment, and the Price Level," Ch. Ill, Fiscal Policies and the American Economy. Edited by: Kenyon E. Poole. New York: Pr en't ice -Hal 1, Inc., 1951* 468 PP* Peterson, Florence, Survey of Labor Economics. New York: Harper and Brothers, 1951* 871 pp. j Putnam, Imogene H., Volunteers in OPA. Office of Temporary! Controls, Office of Price Administration, Washington, « D.C.: United States Government Printing Office, 19^7* ! 166 pp. j Sayre, Robert A., Consumer Prices, 1914-1948. New York: National Industrial Conference Board, Inc., 86 pp. Scitovsky, Tibor, Edward Shaw, and Lorie Tarshis, Mobilizing Resources for War. New York: McGraw-Hill Book Company, 1951* 254 pp. t jWilson, William Jerome, The Beginning of OPA. Part I. The J Price Control Act of 1942, Historical Reports on War . Administration, Washington, D.C.: United States I Government Printing Office, 1947* 246 pp. 1 JWoods, Tighe E., Price Stabilization October, 1951 to | September, 1952. A summary of operations by Tighe E. 1 Woods to the Joint Committee on Defense Production of the United States Senate, United States House of Representatives, Washington, D.C.: United States Government Printing Office, 1952* 34 pp. 166 B. PERIODICAL ARTICLES Ackley, Gardner, "The Relation of Price and Production Controls,'1 American Economic Review, 41:70-73, March, 1951* Bach, G. L., "Monetary-Fiscal Policy Reconsidered,1 1 Journal of Political Economy, 57:383-94, October, 1949. Backman, Jules, "Price Inflexibility— War and Post War," Journal of Political Economy, 56:428-37, October, 1948. Bratt, Elmer C., and Clarence H. Danhof, "Components of Wartime Wage Change," Survey of Current Business, 24:17-24, September, 1944. Bronfenbrenner, M., "Price Controls Under Imperfect Compe tition," American Economic Review, 37:107-20, March, 1947. i Brown, Harry Gunnison, "Cost of Production, Price Controls, ! and Subsidies: An Economic Nightmare," American Economic! Review, 42:126-34, March, 1952. Chandler, Lester V., "Direct Controls Over the Price of ; Non-cost-of-Living Items," American Economic Review, 41:67-70, March, 1951. i Cherne, Leo M., "America's Black Market," Saturday Evening I Post, 215:22, July 25, 1942. I "Consumer Price Index for Moderate-Income Families in Large Cities by Groups of Commodities," Monthly Labor Review, 73: No. 4, 1951. "Consumer Index— U.S. Averages by Groups of Commodities," Monthly Labor Review, 76: No. 3, March, 1953. United States Department of Labor, Bureau of Labor Statistics. Cooper, Gershon, "Taxation and Incentive in Mobilization," Quarterly Journal of Economics, 66:43-66, February, i 1 9 5 2. ; I Gorter, W., and G. H. Hilderbrand, "Is Price Control Really ! Necessary?" American Economic Review, 4l:77-81, March, i 1951. | 167 Heflebower, Richard B., "Proceedings on Economic Mobiliza tion Short of Wclt, American Economic Review, 41:73- 74, March, 1951. Humphrey, Don D., "Price Controls in Outline." American Economic Review, 32:744-59# December, 1942. Maxwell, James A., "Gasoline Rationing in the United States," Quarterly Journal of Economics, 6 0:561-8 7, August, 1946. "Meat: The Price of Being Law-Abiding," Fortune, 44:75# December, 1951. "Meat: The Showdown," Time, 58*99# November 19, 1951. Mikesell, Raymond F., and C. Edward Galbraith, "Subsidies and Price Controls," American Economic Review, 32:524- 37# September, 1942. Mints, Lloyd W., "Monetary Policy and Stabilization," American Economic Review, 41:188-200, May, 1951. Mosak, Jacob L., and Walter Salant, "Income, Money, and Prices in Wartime," American Economic Review, 34:828- 39, December, 1944. Moss, Robert R., "Proceedings on Economic Mobilization Short of War," American Economic Review, 41:75-76, March, 1951 * "Needed: A Free Market," Time, 5 8: No. 14, 8 7-8 8, October 1, 1951. Reder, M. W., "Welfare Economics and Rationing," Quarterly Journal of Economics, 57*153-59# November, 19421 Shaw, Edward S., and Lorie Tarshis, "A Program for Economic Mobilization," American Economic Review, 41:30-50, March, 1951. "Small Business— The Forty-Percenters," Time, 43* No. 5. 7 6, July 30, 1951. Smithies, Arthur, "The Economics of Preparedness for War. Fiscal Aspects of Preparedness for War," American Economic Review, 39*357-65# May, 1949. 168 "The Parity Outrage," Fortune, 43:77-79, April, 1951- Wallis, Allen W., "How to Ration Consumer Goods and Control Their Prices," American Economic Review, 32:501-12, September, 1942. Wickens, David L., "Proceedings on Economic Mobilization Short of War, American Economic Review, 41:74-75, March, 1951* C. DOCUMENTS ABC of Price Stabilization. Office of Price Stabilization. Washington, D.C.: United States Government Printing Office, 1951. 12 pp. Basic Facts About Inflation and Stabilization. Office of Public Information, Office .of Price Stabilization. Washington, D.C.: United States Government Printing Office, September 5, 1951. Handbook of Labor Statistics. United States Department of Labor. Washington, D.C.: United States Government Printing Office, 1950. Hearings Before the Committees on Banking and Currency, House of Representatives, Seventy-seventh Congress, First Session on H.R. 5479. Washington, D.C.: United States Government Printing Office, 1941. Indexes of Retail Prices and Services and Miscellaneous Goods. Detail Report, March, 1935 to June, 1947. United States Department If Labor, Bureau of Labor Statistics, Price and Cost of Living Branch, October, 1947. OPA: Legal Phases of Price Controls 22009. 32 pp. United States Code Annotated Title 50. War and National Defense Emergency and Post War Legislation. St. Paul: West Publishing Company, 308-92. United States Government Organization Manual 1952-1953. Federal United States Office of Price Administration Quarterly Report, January, March, 1942-1944. 169 D. MAGAZINES AND NEWSPAPERS American Federatlonalist The Baltimore Sun Fortune The Los Angeles Times j Newsweek New York Times Time United States News and World Report f i i I I O n lv*ro ,ty o f S o u th e rn C aU fornia L,D r*~

Linked assets

University of Southern California Dissertations and Theses

Conceptually similar

PDF

Russian-expansion and state export of capital

PDF

A survey of mediation techniques

PDF

An analysis of recent expert estimates of maximum world population at a minimum adequate standard of living

PDF

The demand for and the supply of executive talent in the United States

PDF

Philippine import and exchange restrictions

PDF

Comparison of travel durations by sex: Is there really a "meaningful" difference?

PDF

Pawnbrokerage in California

PDF

A study of the special problems of short-run economic prediction

PDF

Price in the American economy: A theoretical inquiry

PDF

Analysis of Air Force pricing in negotiated procurement

PDF

The role of religion in the economic development of India

PDF

The control of unemployment insurance payments in California

PDF

An analysis of the institutional economics of John Rogers Commons

PDF

State intervention in agriculture: The United States and Iraq

PDF

How to maximize the economic efforts of war in real terms

PDF

Inflation and a national wage policy in peacetime

PDF

Labor unions in Iraq

PDF

Federal credit union operation: A case study

PDF

The economics of specialty restaurants with particular reference to Los Angeles

PDF

The contributions of the theory of group dynamics to employee and employer relations

Asset Metadata

Creator Hunter, Gwendolyn Peyton (author)

Core Title A comparative study of price controls in the United States from 1942 to 1952

Degree Master of Arts

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag Economics, General,OAI-PMH Harvest

Language English

Contributor Digitized by ProQuest (provenance)

Advisor Garis, Roy L. (committee chair), Phillips, E. Bryant (committee member), Pollard, Spencer D. (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c20-443450

Unique identifier UC11265753

Identifier EP44739.pdf (filename),usctheses-c20-443450 (legacy record id)

Legacy Identifier EP44739.pdf

Dmrecord 443450

Document Type Thesis

Rights Hunter, Gwendolyn Peyton

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus, Los Angeles, California 90089, USA