The Price Of Price Controls; I. Olds

Yet the controls under which we are laboring in America today do not differ materially and fundamentally from those which have been tried and have failed in virtually every great nation of the world. 4,000 Years Ago About 4,000 years ago, the Hammurabi Code imposed a rigid system of controls over wages, prices, production, and consumption. Those controls blanketed the entire economy of Babylonia; in fact, smothered it completely. [169 ] In Athens, during the fourth century B.C., the govern ment subjected the grain trade to an ironclad system of price controls, and it sent a small army of grain inspectors into the port to regulate every transaction. If, under the watchful eyes of these government agents, a dealer suc ceeded in violating the ceiling price and was later caught, both he and the negligent inspector were put to death. But nothing did any good, and ultimately the system collapsed.

1,650 Years Ago Among the most elaborate and disastrous attempts at price control, of course, was the famous Edict of Diocletian which was promulgated in the Year of Our Lord 301 and which impoverished the whole Roman Empire. That Edict was full of such trenchant words and phrases as "avarice," "extortion," and "lust of plunder." It spoke of ''keeping pronts within bounds," and it denounced mer chants who, possessing "immense fortunes," sought "pri vate gain" and "ruinous percentages." A Familiar Ring Does that language have a familiar ring to the modern ear? Well, so would the regulations themselves. The Emperor put an absolute maximum price on almost every individual item that was sold in Rome in those days, and he fixed the exact wage of every individual worker in every trade and profession-including even the lawyers. Then, in accordance with the custom of his day, he pre scribed the death penalty for all offenders.

[170 ] The Result What happened after that is known to you all. Dealers, re fusing to sell at a lower price than they had paid, simply hid their, commodities under the counter. Producers no longer brought their wares to market. People in the cities suffered dire want, and brawls and riots filled the streets. And so another noble experiment collapsed. Diocletian abandoned his throne and spent the rest of his days in a cabbage patch, there to brood upon the consequence of folly and the waywardness of man. But experience, it seems, can teach us nothing. At the end of the twelfth century, England put a ceiling on the prices of bread and fish and wine; and for the next five centuries, that law was revised, amended-and ig nored. Finally, Parliament repealed it on the grounds that such action was necessary ""in the interest of the public welfare." A·Fatal Blunder During the Dutch Revolution when Antwerp was besieged by the Duke of Parma, the authorities of the beleaguered city promptly clamped price controls on almost everything within its walls-which may have been a stroke of genius from a political point of view, but which proved to be a fatal blunder from the standpoint of military logistics. Be cause prices were so low, the people inside the city con sumed its stores both speedily and wastefully, and the people outside the city could not be induced to smuggle [ 171 ] in new supplies for such a small reward. So, Antwerp, by its own stupidity, blockaded itself far more effectively than the Duke of Parma ever could have.

Common Sense Only in India, in fact, do we find a comforting glimmer of common sense. In 1770 a famine struck the province of Lower Bengal, and the government immediately instituted price controls. So the rice that remained from the previous harvest was quickly eaten, and fully one-third of the pop ulation starved to death before another crop could be grown. But sixteen years later, when famine again struck the province, the government reversed its tactics. Instead of turning to controls, it deliberately encouraged specula tion by publishing nationally the price of grain in every section of the country. Everyone knew where grain could be bought most cheaply and sold most profitably. Supplies, therefore, flowed promptly and naturally from the areas where food was most plentiful to the drought-stricken re gions where it was most scarce-and disaster was averted. The Dirty Maximum Now there are some, of course, who might be unkind enough to say that another comforting glimmer of com mon sense was shown by the people of France during the French Revolution. The fixing of· maximum prices had become one of the characteristic features of the Reign of Terror, but in this case it was the instigators of the con[ 172] troIs who were ultimately put to death. And when Robes pierre and his councilors were being trundled through Paris in the carts of the executioners, the street mobs jeered and shouted: "There goes the dirty maximum!"

Evil Consequences Here in America, our forefathers were fully alive to the lessons of history and were far more ready than we are to profit by experience. Price controls had been widely at tempted on many occasions and in many of the colonies, but never with success; and in 1778 the American Con tinental Congress adopted a formal resolution which de clared: "... it hath been found by Experience that Limitations upon the Prices of Commodities are not only ineffectual for the Purposes proposed, but likewise productive of very evil Consequences to the great Detriment of the public Service and greivous Oppression of Individuals ..." Great Britain That statement is even truer today than it was when the Continental Congress originally made it. England, for example, has now established what is probably the most successful system of price controls this world has ever seen. And certainly no government in history has ever enjoyed a greater measure of compliance from its citizens. These controls have been in effect continuously for thirteen years, and they are still in effect today. Yet the latest in[ 173] formation I have on the subject discloses that prices in England have gone up exactly as far and exactly as fast as have prices in the United States where we have had a comparatively free market during most of this period.

Road To Disaster For nine years, beginning with World War II, France also tried to stop inHation by the imposition of price controls. Yet today the franc is worth only one-tenth as much as it was when that war began, and the cost of living in France has risen nearly twenty times as much as it has in the United States. So the evidence is clear and overwhelming. Throughout forty centuries of human experience, price controls at their best have always been a miserable failure. At their worst, they have led to famine and to bloodshed-to defeat and to disaster. [174 ] TWO PATHS TO COLLECTIVISM h!l Ru&&ettJ e~nch!l * Were we directed from Washingtonwhen to sow, and when to reap, we should soon want bread. THOMAS JEFFERSON Two announcements were recently made by governments 3,000miles apart-the United States and England. A study of these communications reveals the frightening rate of speed at which the revolution toward state socialism. is taking place in the two great democracies.