Felix Morrow

Inflation

(May 1942)


Source: Fourth International, New York, Editorial, Vol.3 No.5, May 1942, pp.131-137.
Transcribed: Ted Crawford.
HTML Markup: David Walters.
Public Domain: Marxists Internet Archive (marxists.org) 2005. You can freely copy, distribute, display and perform this work; as well as make derivative and commercial works. Please credit the Marxists Internet Archive as your source, include the url to this work, and note the transcribers & proofreaders above.


Transcriber’s note: Though the author is not named this was apparently written by Felix Morrow and he claims it as such in Roosevelt and Labor After the Third Coal Strike, Fourth International, July 1943, note on p.206.

Editorial Comment:
The Government’s False Definition of Inflation—How It Encouraged Rising Prices—There Is No Universal Price Ceiling—Capitalist Anarchy in All Spheres of Production—The Workers’ Answer to Inflation

In the period of World War I the people of America hardly felt the consequences of the imperialist catastrophe. Neither our casualty lists nor the rise in the cost of living were comparable to those of Europe. Of the 300 billions which the war cost, nine-tenths were paid by Europe. The ruinous inflation after the war, which engulfed both “victors” and conquered—Germany and Austria, Poland, France and Belgium—was primarily felt here in the form of being able to purchase at absurdly cheap prices the luxury goods of France, the optical and leather goods of Germany, etc. Those were for Americans the halcyon years of travel abroad on dollars which exchanged for thousands of francs and millions of marks, while the great masses of Europe slaved and hungered and their children tried to grow without food.

Inflation now again envelops Europe, this time including England—and the whole world. No longer is America a miraculous exception. America has joined the comity of nations and shares with them the full consequences of imperialism and its wars. For declining world capitalism is almost three decades older and more degenerate than in 1914 and has no room for exceptions.

This is the meaning of the “anti-inflation” legislation, the “price fixing,” priorities and rationing. Far from being ways and means to avoid the catastrophes which engulfed Europe, they express the fact that America has now fallen heir to all the evils of the imperialist epoch. The “Europeanization” of America was already indicated by the mass unemployment of the 1930’s; but that only began the process. Seeking to fix the date when this process matured, historians will probably fix it by Roosevelt’s message to Congress of April 28, 1942 and OPA Administrator Henderson’s price-fixing order of the following day.

The lengthy Henderson document is undoubtedly the most important US state paper of the war. More than any other, it mirrors the capitalist anarchy of the United States, the devastation wrought by the monopolies, the fundamental conflict between the interests of the ruling class and the life-and-death needs of the masses of the people. This mirror is, however, besmeared with half-truths and verbiage which must be cleared away before the horrible visage of capitalist destruction can be seen accurately.

What is inflation? Henderson tells us it is already here: “The rapid, erratic increases in prices we call inflation is no longer a threat; to a painfully substantial degree it is a fact.” But precisely what is inflation? Henderson does not say. The best he gives us is this half-truth: “If unchecked, inflation will launch a race between the wages of the stronger bargaining groups and the cost of living.” As for Roosevelt, he is not superstitious like Hitler who believes in intuition, but he believes in word-magic; he exorcised inflation at one blow by not permitting the word into his message to Congress on the question!
 

For the Rising Scale of Wages

Henderson’s half-truth that inflation is a “race” between wages and prices conceals the truth that inflation is the victory of prices in that race. Inflation is a condition where prices rise while wages lag behind. In itself the rise of prices is not inflation. If wages were pegged to prices, so that any rise in prices would automatically be accompanied by an equal rise in wages, there would then be no inflation for the great masses of the people who live on wages (including salaries of white collar workers and government employees and the pay of the men in the armed forces). A sliding or rising scale of wages geared to the price index is the mechanism which would avoid the ruinous consequences of inflation. Then the quantities in which wages and prices would be computed would be merely a matter of national bookkeeping; it would not matter whether wages and prices were computed in units of $1 or $10 or $100 or $1000, in each case the real value of wages would be the same and the actual quantities of commodities purchasable by the worker would be the same. It does not matter whether we pay 10 cents or $1 for a loaf of bread if our wages are originally geared to the price of 10 cents and rise automatically as the price of bread rises. Inflation is not the rise of prices but the lag of wages. Every worker must grasp this important truth, for it is a major weapon today in the struggle for a decent living against capitalist greed and its political agents. For the automatically rising scale of wages as the price index rises! That must be the working-class answer.

Roosevelt has now shown himself openly as the enemy of that working-class answer to inflation. The shipyard workers, both AFL and CIO, have a nation-wide contract embodying the principle of the rising scale of wages; during the negotiating of the contract a year ago the workers were persuaded to give up many of their demands in return for a guarantee of an automatic wage rise during every six-month period in which the cost-of-living price index rises five per cent. Such a wage rise is now due. Yet on May 4—violating his seven-day-old promise in his message to Congress that “Existing contracts between employers and employees must in all fairness be carried out to the expiration date”—Roosevelt telegraphed the shipyard workers-employers conference that such a wage rise is “irreconcilable with the national policy to control the cost of living.” To freeze wages while prices have risen is inflation. But, in Roosevelt’s word-magic, freezing wages becomes anti-inflation. The workers, however, cannot afford the luxury of such magic. Not only must the ship-yard workers defend their contract, but the entire working class must battle for contracts providing the rising scale of wages and for the extension of this principle to all wage- and salary-workers, including government employees and the men in the armed forces.
 

Why Does Price Fixing Come Now?

Keeping firmly in mind that inflation is the reduction of the buying value of wages, let us carefully analyze Henderson’s document. We shall see that, far from being anti-inflationary, the government policy has encouraged inflation up to now and the measures it is now taking are not primarily designed to halt inflation and will not halt it.

Henderson’s order now formally fixes prices of cost-of-living commodities (with certain exceptions). Recently price controls were also established on other commodities. Why didn’t the government fix all prices in September 1939 when the war began and prices began rising, or at least when the United States entered the war five months ago? In his message, Roosevelt explained that, thanks to the experience of the last war, he knew that prices would rise unless checked. “Because rises in the cost of living which came with the last war were not checked in the beginning,” said Roosevelt, “people in this country paid more than twice as much for the same things in 1920 as they did in 1914.” Everybody understood this process would come this time with tenfold more force than in 1914. Why, then, was it “not checked in the beginning”?

Certainly Roosevelt could scarcely claim that his message and Henderson’s order came “in the beginning.” Henderson gives some figures which show how far along inflation is:

“The increasing momentum of this over-all price advance is shown by the following comparisons: since the outbreak of the war in September, 1939, the prices of basic raw materials have risen by 66 per cent. One-half of this increase has occurred during the past twelve months. Wholesale prices since September, 1939, have Increased by 31 per cent. Two-thirds of this increase has occurred during the past twelve months. Retail prices of foods, clothing and house-furnishings have risen since September, 1939, by 25 per cent. More than three-fourths of this increase has taken place during the past twelve months.”

Why, then, if the government really wanted to keep prices in line with wages, didn’t Roosevelt fix prices twelve months ago and prevent the bulk of price increases? While prices were thus rising, wages were lagging far behind, partially frozen throughout 1941 by government pressure against strikes, almost entirely frozen since December 8, 1941 by surrender of the strike weapon. That the no-strike system froze wages because thereby there was no longer pressure on employers to give wage increases, Roosevelt knows very well. As he said in his message:

“Organized labor has voluntarily given up its right to strike during the war. Therefore all stabilization or adjustment of wages will be settled by the War Labor Board machinery...” (Our italics.)

Roosevelt also knows very well that the War Labor Board has granted very few increases and to a tiny portion of the working population, that the overwhelming majority of wage-and salary-workers were not permitted by the law to even resort to the War Labor Board for increases, and that therefore, wages as a whole were practically frozen while prices were skyrocketing. Why, then, did price fixing come so late?

Because the government deliberately sought to have prices rise while wages stood still. The government wanted this inflationary development. Henderson’s document says so plainly, even though in discreet language.
 

Why Roosevelt Wanted Rising Prices

ere is what Henderson says, in his “statement of considerations involved,” at the conclusion of his order:

“Until six months ago, the main pressure on the price system was wartime demand or wartime shortage of a relatively small number of commodities. Among those were metals, chemicals, sugar and lumber. Prices for many of these commodities quickly rose to levels higher than were required to bring out available production. These price rises could be checked, and were checked, by individual ceilings.

For other commodities, price control was not then desirable. In fact, full use of productive facilities and labor, and the transfer for less essential [to war] to more essential employments, was aided by flexibility in the price structure.” (Our italics.)

Realize, workers, what Henderson is saying! The all-powerful government of the United States, which can stop strikes and freeze wages, by the use of troops if necessary, has no such coercive power over capitalist enterprise. Capitalists have to be cajoled “by flexibility in the price structure,” i.e., by skyrocketing prices, to turn to “more essential” war-production. Only by encouraging prices to rise could the government assure itself of expansion of war production. That is to say, only by yielding to the prices demanded by the capitalist owners of industry. Who is master in the house? Not Labor which is chained to frozen wages. Not the government which has chained Labor. The owners of the private property whom the government cajoles—they are master in the house, even in wartime when ostensibly the fate of the nation is taking precedence over private privilege. This is what is so glaringly revealed by Henderson’s admission that war production could be expanded at the expense of consumer production only by permitting skyrocketing prices in war materials. The 66 per cent increase in basic raw materials prices while consumers goods rose 25 per cent expresses the price mechanism by means of which—and only by this means—the government could get the private owners of industry to shift from civilian to war production.

However, this was only one aim of the government, and if it had been the only aim, it could have been achieved by leaving prices of war materials uncontrolled but fixing the prices of cost-of-living commodities. This is what would have been done—had the government wanted to prevent inflation, to prevent the 25 per cent rise in the price of food, clothing and house-furnishings. But the second aim of government policy was precisely a moderate inflation: rises in prices which would cut down the amount of cost-of-living commodities which the masses would be able to purchase with their lagging wages.

To slash the purchasing power of the masses is always the capitalist method of financing war production. That has already been partially achieved by the inflationary development in prices of cost-of-living commodities. Roosevelt’s message proposes additional methods for slashing purchasing power: “broad” taxation (of the masses) and increased “voluntary” purchases of war bonds. Compulsory “savings”—deductions from wages for war bonds—is already operating in England and Germany and Roosevelt is preparing for it here. Taxation, “borrowing” from current frozen wages, and “moderate” inflation—this trinity of methods of financing the war at the expense of the great masses is common to Hitler, Churchill and Roosevelt. Fascist, Tory and “liberal” capitalism are sisters under the skin.
 

The Real Aim of Price Fixing

Completely imbued with this outlook, the Henderson document has as its basic assumption the idea that hereafter the result of inflation—the sharp curtailment of the purchasing power of the masses—should be achieved by the other means: taxation, “borrowing” by the government from current wages, and preventing any rise in wages. Henderson says:

“Left to itself, the process [of rising prices] has no definite end. It can be stopped only by measures which will eliminate the occasion for increased income payments on the one hand, and narrow the gap by withdrawing excess purchasing power on the other. The alternative is inflation.” (Our italics.)

This is like offering a man the “alternative” of being shot instead of hanged. Either frozen wages, compulsory savings, heavy taxation will slash your standard of living. Or it will be slashed by inflation. Such are the “alternatives” offered by Roosevelt and Henderson.

Since the inflationary rise in cost-of-living prices has been effectively slashing the standard of living of the masses, why did the government now resort to price fixing? One reason was the angry demands, arising everywhere, for higher wages; price fixing is given the masses as ersatz-wages. However, there was another urgent reason for price fixing.

The government’s aim in permitting prices of war materials to rise was to curtail production for the consumer in favor of war production. However, at a certain stage this process leads to skyrocketing prices of consumers goods, for two reasons: (1) It is an economic law that price rises in one field in the end lead to over-all price rises, hence skyrocketing prices in war materials tend to be reflected in similar price rises in consumers goods. (2) This rise in consumers prices is tremendously speeded up by the curtailment of consumers production which, creating scarcities of consumers goods, leads to higher consumers prices independently of the general rise in prices. At this point, which has now been reached in the United States, the rising prices of consumers goods tempt entrepreneurs to produce more for the consumers market.

To prevent any expansion of production for the consumer, and to still further curtail production of cost-of-living commodities is one of the main aims of Henderson’s order. He says so quite clearly:

“To control the price of more essential products[i.e. war materials] and leave the price of less essential products [i.e., food, clothing, shelter, etc.] uncontrolled at best involves arbitrary distinctions. More important, it prevents labor and materials from being used in more essential uses...

“If a price is fixed on an essential item, and non-essentials remain uncontrolled, manufacturers will switch from the [war] essential to the [consumers] non-essential. The transfer may be easier in some instances than others, but the tendency is plain.” (Our italics.)

Here, then, is the basic aim of Henderson’s order—the curtailment of consumers’ production and the maximum expansion of production of war materials. He is not so much concerned with keeping down the prices of cost-of-living commodities but of making it less profitable to produce those than to produce war materials. Which means less and less production of the cost-of-living commodities, less and less decent living available for the great masses. But this government policy creates a vicious circle. Growing scarcity of consumers goods means an irresistible rise in the cost of living—either openly or through “disappearance” of available goods from legal channels and their sale on the illegal Black Market. Far from being an anti-inflationary move, Henderson’s order means more and more inflation. It is designed not to safe-guard the cost of living but to assure maximum expansion of war production at the expense of the standard of living.
 

There Is No Universal Price Ceiling

But, the reader may ask at this point, aren’t all prices fixed, not only consumers goods but also practically all other commodities? And doesn’t this universal price ceiling assure a relative stability of the amount of consumers goods produced and the prices we will have to pay for them?

The answer to these questions will illumine for us the state of capitalist anarchy in which we live.

As Henderson correctly points out, only a universal price ceiling can conceivably provide control of prices of any one group of prices, for the prices of all commodities are now extremely interdependent. He says: “There are inflationary pressures on prices everywhere. And so everywhere that prices exist there must be controls to prevent them from rising any further... The interdependence of prices, when prices are rising generally, prohibits any possibility of piece-meal control.” But precisely this is the question: Has the government really instituted, can it really institute, a universal price ceiling? The answer is no.

Ostensibly prices of all commodities are fixed with few exceptions. However, one of those exceptions now amounts to 50 per cent of the national income: what the government buys for war. It is true that the prices of steel, rubber, aluminium, etc. are officially fixed, but the prices of tanks, guns and bombers are not fixed and this fact negates the fixed prices of the materials that enter into the tanks, guns and bombers. A few typical examples will suffice to make this clear.

President Murray of the CIO charged some time ago that there was a conspiracy to curtail steel scrap collection in order to boost the price. He was never refuted. After a while the OPA fixed ceilings for steel scrap of various categories. The result was not fixed prices but a dozen ways of charging more than the ceiling prices. Time magazine reports: “No.1 bootleg method is to ‘upgrade’ a load of low-grade scrap with a thin top layer of good scrap, selling the whole thing at the top limit for good stuff, exchange winks with the buyer.” The buyer is not in the position of the worker paying a higher price for a loaf of bread; the buyer does not shoulder the burden of the “illegal” higher price of the steel scrap, but adds it to the price he charges the government for the finished war product. It is impossible for the government to police its price-fixing regulations in this realm; moreover, it wants to increase war production at all costs and, as Henderson’s document makes clear, it can do so only through the mechanism of more profitable prices for war production than for consumers goods. As War Production Board Director Nelson told an appreciative audience of monopolists on January 29: “To hell with stopping to count the cost. Start turning out the stuff and we can argue the terms at our leisure. Turn it out by inefficient methods if necessary and figure out better ones as you go along—but get the stuff moving, whatever happens” (NY Herald Tribune Jan. 30). That is the only “goad” the government has—higher prices and still higher prices for war materials. Hence not only the buyer and seller of that steel scrap wink at each other, but the government officials wink with them too.

The example of “illegal” prices for steel scrap is striking, because it is so flagrant a disruption of the universal price ceiling. Far more important, however, are the disruptions which do not technically violate the law. Ford, for instance, produces much of the iron, steel, rubber, plastics, paints, etc. he is using. What meaning is there to fixed prices for these materials, when Ford does not sell them but builds from them tanks and bombers which he sells to the government under negotiated (non-competitive) contracts?

The disruption in the universal price ceiling takes place not only at the stage of the finished war product; it also appears at the stage of the “fixed-price” item. What, for example, is the real price of a given unit of steel? Let us assume the fixed price is $1. But if simultaneously the government gives the steel company another 50 cents per unit, then the fact that the steel company sells the unit to a tank manufacturer at $1 does not mean that that is the real price; in terms of the national economy the price is $1.50. If at the same time the government is giving another steel company 60 cents per unit, the real price of its steel is $1.60. Thus there would be a double disruption of the price ceiling: first by government subventions; second by varying subventions to different companies. Exactly this is happening now.

The equivalent to our example of government subventions at 50 cents per unit is US Steel Corporation’s subsidiary, Carnegie-Illinois, which has been given $117 millions of government money with which to build a new plant. This government-financed plant ostensibly remains government property but with options for “purchase” by the operating company; and, as the Senate Truman Committee pointed out, “In the event of inflation the companies having such options may be enabled to purchase the facilities constructed with government funds at a fraction of their true value.” Furthermore, the $117 million plant consists of “scrambled” facilities, i.e., it is so mixed in with Carnegie-Illinois’ own plants that it could not be operated alone by any other purchaser. In short, at least a large part of the $117 million is a government subvention to Carnegie-Illinois and must be added to the “fixed price” of its steel to determine its real price.

Since that subvention to Carnegie-Illinois, however, an even greater subvention—greater per unit of steel—has been given to Bethlehem Steel Corporation—the equivalent of our example of a 60 cents per unit subvention. Readers of the February Fourth International will recall that Felix Morrow’s article, The Effects of Monopoly on War Production, described a contract for a government-financed plant proposed by Bethlehem. The Bethlehem proposal of a $50 million plant provided for a “lease” of the plant for 35 years—a great steel plant provided by the government for 35 years free of charge to Bethlehem. The government counsel considered this so outrageous that he recommended rejection of the proposed contract, saying: “In times of emergency it would be fatal for the government to concede that it is weaker than any of its corporations and that it must accede to their demands, however outrageous, in order to obtain arms and supplies with which to defend itself.” Nevertheless, the author of the Fourth International article was able to predict then: “Fatal it may be, nevertheless Bethlehem Steel is sitting tight, certain that the government must consent to this contract. As a matter of fact the contract would probably have been signed already except for the publicity created by the Truman Committee investigation of it.” And so it came to pass! The New York newspaper, PM, announced on March 19 that the government Defense Plant Corporation had secretly signed this contract! We can expect that the next contract signed with a US Steel subsidiary will make up for the advantages given to Bethlehem. And so the disruption of the “fixed price” and the ascending spiral of real prices will continue.

These examples demonstrate that there is no universal price ceiling actually existing. And since, as Henderson concedes, price rises in one field affect all prices, the cost of living will continue to rise while wages remain frozen. And that is inflation.
 

Planning Is Impossible Under Capitalism

In order to get the masses to endure the suffering arising from the war economy, the government must pretend that its curtailment of consumers production, freezing of wages, “borrowing” from wages, and taxation of the masses, constitute one aspect of an all-sided plan of wartime production. Ostensible strict mathematical computation dictates the attack on our living standards as one component of a grandiose plan. Actually, however, there is no plan, and there cannot be, under capitalism. As we have seen from Henderson’s document, the only mechanism of capitalist government “planning” is higher prices for war production, making it more profitable than consumers production. But even this mechanism is not fully available to the government: between this mechanism and government “planning” stands monopoly capitalism. The mechanism of higher prices sets the wheels of monopoly factories turning; but the monopolies prevent that mechanism from setting into motion the wheels of non-monopoly factories and using all available productive facilities. Thus war production itself becomes a monopoly. The last official figures were those of the special Small Business Committee of the Senate (Senator Murray, chairman) which on February 5 reported that 56 corporations have over 75 per cent of all war contracts, while thousands of smaller plants are shutting down. If this is planning, then it is planned anarchy.

If the capitalist regime cannot plan in the realm of war production, still less can it plan for consumers production. Henderson tells us in very precise figures that “during 1942 the supply of goods and services available for civilian use will total $69 billion” and that “demand in 1942, unless limited, will exceed supply by $17 billion.” That is, demand will exceed supply by 20 per cent. Henderson says this very glibly; nonetheless his is merely a guess that demand will thus exceed supply of consumers goods by 20 per cent; it may turn out to be 30 per cent, and that difference may be the difference between subsistence and near-starvation for millions. Henderson does not know and cannot know. The government “plans” to make war production more profitable than consumers production and knows in a general way that this will mean considerable curtailment of food, clothing, house-furnishings, etc. But how much less, the government has no way of knowing. Under this “system” of capitalist anarchy, if dietitians computed that below a certain quantity of food millions would be in danger of dying from starvation, the government would have no way of knowing how close to that quantity next year’s food production will be. In encouraging war production at the expense of the goods and services which make up our living standards the government, which can encourage this only through the anarchic mechanism of prices, has set forces in motion over which it has little control.

If the items which Henderson’s order lists as “cost-of-living commodities” were only usable for civilian consumption, then the government might roughly compute what we shall have to live on during the coming year. But practically all the commodities constituting our living standard are also usable in war production, including much of our food. Today, thanks to the development of industrial chemistry, agricultural raw materials have far more uses in industry than they had during World War I. How much of agricultural produce will go to the war industries and how much will go to the masses for consumption? Henderson does not know and cannot know.

Consumers Goods Are Also War Goods Can Henderson tell us how much corn we shall have available to eat during the coming year, including hogs fed on corn? If he claims to know, he is lying. As we have seen, prices of war products in reality have no ceiling. Assuming cost-of-living commodities remain near the price ceiling, at what point will it become more profitable to use corn to make alcohol for use in industry and explosives than to feed it to hogs and human beings? Henderson cannot know but he does know that already the corn bins of Iowa are emptying at an unprecedented rate—how much for hogs and how much for alcohol nobody knows.

The farmer is told by Henderson that the price of fertilizer is fixed. But how much of it will be available to the farmer to raise food with, and how much of nitrates and other fertilizers will, instead, attracted by the profit advantages in war production, go into explosives? That will be determined not by government planning but the anarchic forces let loose by the government in favor of war production.

Even during the last war the poor and the workers froze because it was more profitable to sell coal and petroleum to war industries than to consumers; now the same thing will be repeated in even worse form.

Will we have shoes if it is more profitable for leather manufacturers to turn their product over to the war industries? Of course we won’t have shoes then.

Cotton is an important ingredient in explosives and other war materials; ergo through the mechanism of favorable prices it will go there, and government figures for “allocation” of cotton goods to consumers will prove to be a fraud since price and not planning determines.

Hardware of various kinds is solemnly listed by Henderson as a cost-of-living commodity, which it is, particularly for the farmer—including dirt shovels, axes, claw hammers, hand-saws, etc.—but the same manufacturer will obviously get more for these scarce tools from the war industries than from the farmer.

Metal and glass containers are vital for the enormous portion of our food which we buy in cans; but metal and glass are equally vital for war materials, and far beyond priorities and allocations it will be the favorable prices in war industries which will cut down the amount of metal and glass containers available for food.

And so on. We could continue for pages the “cost-of-living” commodities which are also war materials and which will therefore by the anarchic price system tend to go to war industries rather than to the consumer. Add to this that it is more profitable for a cannery to can bully beef for war orders than roast beef for the consumer. It is more profitable for a processing plant to make powdered eggs, dried milk and cheese under government contract for Lend-Lease shipments to Britain.

Add to all this that the only government “planning” in the field of consumers goods today is—in the midst of total war—the internationalization of AAA “ploughing under.” Using its growing power in Latin America, the government Commodity Credit Corporation has just bought 200,000 bales of Peruvian cotton, which will remain in Peru and the purchase is on condition that Peru will reduce its cotton acreage; similar deals have been made with Haiti, Nicaragua and Paraguay, and Brazil is shortly to be drawn in. This curtailment of cotton production is costing the government tens of millions without providing any addition to war materials. It is brazenly a measure for a post-war world which Roosevelt assumes will be, like the pre-war world, a world of ploughing under. Can Roosevelt be certain that the Americas now have enough cotton for the needs of this unpredictable war and for the consumers? Of course not. Meanwhile, however, the philosophy of ploughing under prevails, because the United States now has the upper hand in Latin America and can enforce it, while it may not have it after the war!

Add to all this that, while meat prices have skyrocketed and meat products have been Lend-Leased abroad, Washington is punishing “disobedient” Argentina by withdrawing cargo ships so that Argentine beef products are piled everywhere on docks and warehouses. The same ships that are carrying U. S. meats and dairy products to Britain and elsewhere could be, instead, transporting the rotting Argentine surpluses to the same destinations. The same is true of other items in the surpluses in which Latin America is now being crushed into line by Washington, as Terence Phelan reports in his article in this issue.

In short, the only government “planning” in the realm of cost-of-living commodities is in setting forces into motion which will cut down those commodities in favor of war production—how much cutting will be decided only by the “impersonal” profit motive galvanized by favorable prices for war materials.

This scarcity, in turn, will set irresistible forces in motion within the field of cost-of-living commodities to raise their prices—either by the “legal” method of abandoning the present ceilings or by the “illegal” method of the Black Market.

“It is the immediate purpose of this Regulation to guarantee to the American people that their living costs will remain stable,” says the Henderson order. Another paragraph later, however, he says: “This Regulation does not ensure that the standard of living of any individual or group or of the Nation as a whole will remain unimpaired. The loss of overseas supplies and the conversion of domestic manpower and facilities to war production make this impossible. The material standard of living of the American people will fall.” Both propositions cannot be true! If the regulation guarantees a “stable” living cost, how can the standard of living also fall? The truth of the matter is that Henderson’s assurance of a stable living cost, like similar statements of Roosevelt, is merely the logically necessary formula with which to justify the wage-freezing situation. Roosevelt and Henderson know very well that, since they are curtailing cost-of-living commodities by the use of such an uncontrollable instrument as higher prices for war materials, “the standard of living will fall” through rising prices of cost-of-living commodities.

As a matter of fact, while publicizing the impression that the government has solemnly pledged to move heaven and earth to keep cost-of-living prices at the March level, Henderson slips in a hint of what is coming:

“Price regulations must not only be promulgated; they must be accepted and where necessary enforced. The full pressure of excess purchasing power would insure the disregard of law.

When the Black Market flourishes and prices skyrocket, Henderson will remind us that he promised to keep prices down only on condition that we on our part surrendered that $17 billions of “excess” purchasing power in taxes and loans to the government!
 

Bureaucratic Policing of Prices is Futile

When Henderson was issuing his order, he insisted on being photographed throughout the press interview side by side with a horse-faced gentleman from Canada, chairman of its Wartime Prices and Trade Board. Seeing the two faces together in the newspapers, the gullible reader was to understand that Canada had successfully fixed prices and by heck we could do what Canada did. That Canada is a country as large as the United States, but with one-twelfth of the population, predominantly agricultural, and expending per capita on the war much less than the United States—of this not a word. Above all, not a word about the much more comparable example of Britain, where two and a half years of price fixing and rationing have resulted in the most extensive Black Market in all history.

While the gentleman from Canada was sharing the photographs with Henderson, government spokesmen hastily informed the press that in one crucial aspect Canada’s example would not be followed. The Canadian price-control policing system is quasi-democratic in form; eighteen national women’s organizations have their members as the nuclei of the regional and local price councils while the members of the organizations have the right to observe prices, question merchants suspected of raising prices and Black Market activities, etc. The Canadian government chanced this “mass consumer participation” method for two reasons: the trade union movement there is very weak in numbers and could not easily, therefore, demand the right to name the members of the local price councils; and, as we have already said, the predominantly agrarian economy and the small war expenditures mean far less inflationary pressure in Canada than here.

No women’s organizations exist in this country which could pretend to be as representative of the mass population as are the trade unions; to talk here of “mass consumer participation” by organizations would mean the workers’ organizations. Local price committees manned by the unions would tend to become proletarian forums voicing the class anger of the masses against the scarcity of food and clothing, rising prices and the Black Market. Hence at this point Henderson abandons his much-touted analogy with Canada:

“It has been learned authoritatively that civilians—even organized women’s groups representing a large share of the retail buying public—will not be asked to ‘watch’ prices for the government.

“... Such a system, it is declared, is not feasible in the United States because the price control order is necessarily much more complex because of varied climatic conditions and because the population is twelve times greater than Canada’s.” (New York Times, April 28, 1942.)

The “explanation” for not emulating Canada is patently fraudulent: “varied climatic conditions” also exist in the great area of Canada and the greater extent of our population would merely require more committees. The real explanation is the government’s well founded fear that the ten million organized workers, directly representing families constituting nearly 50 million people, would become the militant leaders of price committees if they are drawn from the general population.

The air raid warden setup is relatively democratic in the neighborhoods, with popular and representative people being chosen as the house and street wardens. But the government and the capitalist class dare not permit even a semblance of democracy in the price control system. Prices will be policed by a new Retail Trade and Services Division, Henderson announced on April 28. “The new set-up will use the existing OPA field organizations, and will consist of regional, state, district and local boards. Mr. Henderson said members of the local boards, to be drawn from the present rationing boards and civilian defense councils, would continue to work on a voluntary basis.” In short, a completely bureaucratic setup, dominated by paid government officials, supplemented by hand-picked local businessmen. Note, furthermore, that the new setup is a retail division. That is, such price control pressure will be exerted on the local storekeepers. Who and what organization will see to it that the great food packing, canning and processing monopolies maintain fixed prices, distribute the ever scarcer items equally to all storekeepers, do not divert big stocks to Black Market enterprises, do not hoard for higher prices? On this question the government is silent.

The bureaucratic price fixing system dooms in advance any perspective of adequate policing. That price fixing must be policed, Henderson admits in his order, saying: “Price regulations must not only be promulgated; they must be accepted and where necessary enforced.” But in announcing the formation of the Retail Trade and Services Division, Henderson blandly denies the decisive problem of policing! The press reports him as saying:

“In emphasizing that the new retail organization would be largely administrative in character, Mr. Henderson said that little time was spent by the experts who devised the order in ‘figuring out means for putting people in the hoosegow.’

“’The idea that we will have a whole army of people searching for violations will not be an important part of the picture,’ he asserted. He said he did not believe that squadrons of price policemen would be necessary if every one in the country, consumers, retailers, wholesalers and manufacturers would realize that price control had been introduced for their benefit and would cooperate accordingly to make the program work.” (New York Times, April 28, 1942, Our italics.)

Does Henderson believe this pious clap-trap? How can he, in the face of what has happened in England? There, big wholesalers and manufacturers don’t think that rationing and price-control “had been introduced for their benefit.” They divert huge quantities of the dwindling consumers goods to Black Market enterprises and to favored storekeepers. One consequence is indicated by British official figures this March that, in the typical city of Glasgow, 25 per cent of the small non-food shops have closed their doors. The goods diverted to the Black Market are of course largely beyond the pocketbooks of the poorer workers. Recently airplane workers in England petitioned for a seven-day work-week—not out of patriotism but because they cannot feed their families on a six-day work-week. And these are among the higher paid workers! The main cause of this situation is, of course, the diversion of labor and commodities to war production and the capitalist anarchy of production. But bureaucratic policing—more accurately, failure to police—is an important factor in accelerating inflation.

For Real Committees on Prices! Democratic committees on prices and rationing are needed by the masses in their fight against inflation. Delegates from the factories, the trade unions, neighborhood block-meetings, housewives’ groups, should be the members of these committees. A network of such committees should cover every city and town, connected by city-wide and regional committees. Into these committees should be drawn the farmers and small merchants who, in their capacity of consumers, are vitally concerned with lower prices and equal rationing. These committees would have among their tasks not merely that of seeing that the miserable local storekeeper observes the fixed prices. Far more important, they would proceed to control the wholesalers and manufacturers, ferreting out goods hoarded in the warehouses, the surreptitious diverting of goods to the Black Market, the favoritism of the wholesaler and manufacturer toward the big department stores and chain-stores.

Not the least important of the achievements of these committees would be in erasing the dangerously growing hostility between farmer and worker. As Henderson says: “Suspicion of undue advantage and profiteering has already been engendered between farmer and worker .... “ Committees on prices and rationing, joining together worker and farmer, would end that suspicion, which is exacerbated by unscrupulous capitalist propaganda which tells the farmer that the goods he buys are costing him more because of higher wages. Farmer and worker together, to the capitalist’s lamentations about costs of production, must answer: “Show us your books; we demand control over the fixing of prices.” By this means the workers will be able to prove to the farmers that the real reason for high prices is not high wages but the exorbitant profits of the capitalists, the diversion to war production, and the overhead expenses of capitalist anarchy.

The existence of such committees, genuinely representative of the mass of consumers, would inevitably raise the question of planning of production for the consumer. When examination of the books and warehouses of the sugar dealer shows that, in addition to profiteering, scarcity is the result of diversion of sugar to manufacturing alcohol for war purposes without consideration for the minimum needs of the masses, the committees will become schools teaching the necessity for planned economy. When the masses discover that the diversion of their food and other necessities to war production is galvanized by profiteering while idle plants and unemployed workers stagnate, they will understand the burning need for expropriation of all war profits and nationalization of the war industries under workers’ control.

These are life-and-death questions for the working class, not theoretical abstractions. The four horsemen of hunger and disease, inflation and death, are plunging into our midst. Every Marxist must transform himself into a tribune of the people, summoning them to battle for their lives and the future of their children. We must close the gap between the imperative socialist tasks and the present political outlook of the great masses, who still half-hope that the past it not irremediably gone. That transition from today to the socialist tomorrow requires that we arouse the American proletarian giant for these pressing tasks.

For the automatically rising scale of wages as prices rise!
For democratic committees on prices and rationing!
For the nationalization of the war industries under workers’ control!

 


Last updated on: 8.1.2006