The Collapse of Controls

December 22, 1952

On Oct. 18, the Wage Stabilization Board rejected the proposed increase of $1.90 a day for soft-coal miners. It ruled that $1.50 was the highest increase allowable under the stabilization policy. The miners then went on strike. This was embarrassing to Mr. Truman at the height of the election campaign. He saw John L. Lewis, and the strike was called off. As it is well-known that Lewis does not call off a strike and leave for South America merely on a nebulous promise that his case will be “reconsidered,” it was widely assumed that Mr. Truman had given him a definite assurance that he would retroactively approve the full $1.90.

Post-election developments have done nothing to shake this assumption. Mr. Truman’s action of Dec. 3, in discarding the counsel of his own stabilization officials and overruling his own wage board to grant the full $1.90 increase, stripped the last veil from any pretense that wage and price control was being administered honestly and evenhandedly.

The chairman of the board, and its industry members, promptly resigned. The chairman’s statement explained why he could not “usefully or conscientiously continue.” The industry members explained why they could not “be parties to what we believe to be the perpetration of a fraud upon the American people.” “If your action,” they wrote to the President, “means that the small and the weak are to be restricted by wage controls, while the big and the powerful are to be allowed whatever excessive increases result from the threat of a paralyzing strike, then there no longer exists the equality with which all law and all regulation should be applied in a republic. . . . We cannot participate in a program which would require us to grant special privilege to a few, and to make second-class citizens of all others.

“On the other hand, if your action means that all employers and employees may put into effect increases as far in excess of sound stabilization policy as those you have approved for the coal miners, then we must advise again, as both we and the board’s public members advised in our coal case opinions, that wage controls become an empty shell, and a fraud upon the people.”

This logic is inescapable. The efforts of Mr. Truman and his remaining “stabilizers” to rationalize his action have only involved them in further contradictions and absurdities. Mr. Truman pretended that he overruled his own board just to save Mr. Eisenhower from a coal strike. But if he openly yields to every major strike threat, he cannot still pretend to have a stabilization program. Yet he does: “It is therefore my firm intention to continue a strong stabilization program and turn it over to the new Administration as a functioning, effective entity. If the new Administration then wants to scrap price, wage, salary, and rent controls it will be free to do so on its own responsibility.”

The intent behind this is transparent. It is to destroy the substance, and preserve the form; to act “for the record”; to destroy the fact of wage control but to keep the pretense—and then put the blame for “scrapping” the program on the Republicans.

Meanwhile Mr. Truman’s stabilizers talk solemnly of “sealing off” the coal wage increase from the rest of the economy. This neat trick would require not only putting the entire burden on the coal companies, but refusing to all other unions the increases granted to the coal miners.

The new Administration should now drop all wage and price controls—not because Mr. Truman did not administer them honestly and impartially, or because “the need for them has now passed,” or because it would be politically difficult to restore them, but because they are wrong in principle. They do not prevent or combat inflation; they merely curtail and unbalance production. They owe their existence to blind envy and economic ignorance. Inflation is caused by the excessive creation of money and bank credit. At the same time as Congress drops wage and price controls, it should take steps to see that the continuous manufacture of more money and credit is brought to a halt.