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The New International, December 1945


Susan Green

Economic Basis of the Black Market

The Profit Motive and Price Ceilings


From New International, Vol.11 No.9, December 1945, pp.279-282.
Transcribed & marked up by Einde O’Callaghan for ETOL.


Since V-J Day there has been a marked increase in the supplies of food – including poultry and meat, commodities so cornered by the black market during the war that it accounted for ninety per cent of those sold in New York City. The easing of rationing has followed the increase of supplies. Though prices are still high and the black market continues to have a footing in lines of civilian supplies that continue to be scarce, we may say that the back of the black market has automatically been broken and the poignancy of the wartime crisis is behind us.

“Gone and forgotten” should not, however, be the net result of this phase of the war – nor of any other phase of it. While in this country people were not starving and freezing on the streets, as for instance in Greece, we had unheard-of prices, protracted shortages, complete disappearance of commodities into the black market, resulting in actual malnutrition and, for the housewife, in enervating hardships.

All this can be laid on the doorstep of private profit and the capitalist government, as their ugly offspring. Only in the sale of defective war material for shipment to the troops, was the lust for profit more evident than in the food situation. There was an almost conspiratorial collaboration between the food industry and government. A review of the food crisis in this country during World War II can serve as fundamental educational material for the American working class, pointing unequivocally to the need for nationalization of industry and for a workers’ government. It is with this object in view that this article is written.

The Thread of Gold

Anarchy and chaos characterized the food situation throughout the nation.

Shortages and lines of weary, waiting women existed side by side with bursting warehouses and rotting surpluses going to waste. Ration point values were increased, decreased and again increased. There were the silent, unannounced strikes of big business against cooperating to bring food and commodities to the people, and there were the bombastic strikes of the little storekeepers caught between the black market and OPA ceilings. The black market was “cracked down on” – at least we were told – many times, but like the cat, it not only had nine lives but each one was bigger and better than the one before.

Rackets in counterfeit ration coupons flourished. Speculators cornered the market on essential commodities. The government steadily increased subsidy payments to big business, while Congress refused to allow the OPA a decent operating budget. The consumer was promised relief seven days a week, while the housewife paid 72 cents for a dozen eggs and the coal miners of Illinois went on strike to get more meat so they would have the energy to continue producing coal. Yet in Spokane beef supplies were so plentiful that butchers had difficulty moving their stocks, and 400 carloads of eggs were “mislaid” by the War Food Administration.

However, a clear-cut thread ran through all this mess. Big business, big farm corporations, big cattle-raisers, meat packers, leather goods manufacturers, textile concerns, systematically, constantly and planfully dominated the situation. They controlled government agencies and lobbied Congress in the interest of bigger and better war profits. They reaped golden harvest out of the sweat, toil and blood of the rest of the population.

In spite of the demands of the war, there could have been plenty of food and other supplies for all – if only the element of private profit had been eliminated. The private profit motive is responsible for the exorbitant prices, for the made-to-order shortages, for the profiteering black market. Big business, and the capitalist government that caters to it and protects it and its profits, are to blame for children not having more than one egg a week, and not having meat in months during the war.

How Real Were the Shortages?

This question is not asked to ridicule the much-abused housewife who knew full well that there was a shortage of meat, chicken, butter eggs, canned fish, cheese, sugar, canned fruits and vegetables, and even fresh fruits in the summer – to say nothing of such items as leather shoes and textiles. No ridicule is meant. But the women waiting on long lines should have known whether their plight was due to the actual absence of food or to the manipulations of the war profiteers and the equally reprehensible conduct of government agencies.

When cattle slaughterers refused to buy carloads of choice steers that would provide hundreds of thousands of pounds of steaks and other cuts, because they wanted to force the OPA to raise ceiling prices, that created a meat shortage, but an artificial one for the sake of profits.

When there were 676,111,000 pounds of frozen meat in storage in the New York district, as was the case in March 1944, but kept off the market to bolster high prices and the flourishing black market, there was no real meat shortage though the consumer could get none of the frozen meat.

In March 1945 the National Independent Meat Packers Association said that the beef situation was “anomalous because we have on the range the largest cattle population in the history of the United States-80,000,000 heads.” Then why the meat shortage and why the tremendous growth of the black market in meat? Because the cattlegrowers didn’t like OPA prices and preferred supplying the black market to line their pockets with gold.

A Scrambled Egg Situation

In November 1944 War Food Administration officials were saying that there was an over-supply of 50,000,000 hens in the country and that there would be more eggs in the spring of 1945 than the authorities would know what to do with. Why then the shortage of poultry? The poultrymen were holding onto their laying hens because they wanted to get the high government prices for eggs. The government was buying eggs, without rhyme or reason, placing them in storage until they rotted or until speculators got hold of them. So there was also a shortage of eggs.

Illuminating this subject is a report of the Senate War Investigating Committee. Lieutenant Colonel Ohmstead was testifying that 5,000,000 cases of surplus eggs had been purchased by the government to support prices at 90 percent of parity and that the government would do the same thing this year.

Senator Ferguson: Do you mean to say that the American taxpayers have invested between $100,000,000 and $200,000,000 on eggs we have no use for?

Col. Ohmstead: That’s right.

Ferguson: What are you going to do with all the eggs?

Ohmstead: I wish I knew.

WFA Favored Shortages to Up Profits

The food industry soon realized that it would be better off, from a long range point of view, if it kept stocks down as much as possible. The food trade was afraid of surpluses. It wanted low stock piles and high prices and profits. Long queues of tired women trying to get the necessities ‘for an adequate diet were grist in the profit mill.

The WFA played right along with the food barons.

Donald Montgomery, formerly of the Department of Agriculture, and now a statistician for the CIO, claims that the WFA’s policy

“... has been dictated more by a desire to protect the monetary value of food stocks .. and the profit of food industries ... than to protect the food needs of the people.”

The United Auto Workers Union accused the WFA of

“... frankly acting to protect the profit interests of United States food trades ... much of the present shortage was planned by the WFA’s production plans of two years ago ... The rest of it has resulted from its program, announced last May, to keep commercial and government food shelves down to minimum stocks – it was a deliberate application of the scarcity technique which any good food monopoly uses when it can.”

From all the facts enumerated above, it is plain that “How real were the shortages?” is indeed a very pertinent question. With the largest cattle herd in history, with millions of cases of eggs going to waste, with warehouses bursting with supplies, there was no real shortage. What existed was a virtual conspiracy between business and government, resulting in artificial shortages, spectacular prices – and luscious war profits.

OPA Prices Based on Pre-war Profits

Why was the OPA such a farce?

Few people realize that the whole war price structure was based on the proposition that the capitalists must make at least pre-war profits. The Price Control Act actually required that ceiling prices be fixed to return profits of at least pre-war levels.

Therefore, right from the beginning the price structure was determined by the capitalists themselves. It was their own say-so as to what their pre-war profits were; their own bookkeeping was not questioned. Then the pressure for higher prices started, and the OPA gave in, gave in and gave in.

Industry found every possible loophole. At first the OPA set price ceilings, in general, on the basis of over-all earnings of corporations. The idea was that prices were not to be increased unless the total earnings of the corporations involved fell below pre-war levels – of course, at their own say-so. But soon the profit-grubbers found a new wrinkle to exploit.

They were no longer satisfied to let the over-all earnings of the industry de termine the price of a particular item. Under their pressure, the OPA adopted a “product standard.” If an industry claimed it was not making pre-war profits on any one of its products, it was entitled to price increases on that product – regardless of how much profit the industry was earning on its total products.

Here is an example of how this “product standard” worked out. In 1944 the textile industry was granted price increases on different items, on the theory that the industry was not making prewar profits on these particular things. However, in the year 1943 the cotton textile industry as a whole was taking in profits, hand over fist, amounting to 772 per cent above pre-war levels! That gives an idea of the way legalized war profiteering went on. No wonder the cost of living climbed, and climbed some more.

Beginning with OPA Director Chester Bowles, a topshelf advertising executive, OPA officials consisted of men with big business background. It showed in their attitude. Let one of them speak for himself. Here is James F. Brownlee, deputy administrator in OPA, stating before the Senate Committee on Banking and Currency:

“OPA never reduces prices merely because it considers profits are large. Its orders from Congress are to control prices, not profits.”

Congress and the OPA

Another thing to be recognized is that the OPA was adopted hesitantly, veritably a homeless orphan. Congress never allowed it sufficient funds to operate properly. Congress appropriated hundreds of billions to wage war, but to keep prices down for the consumer it just could not spare a few extra dollars. Why? First, Congressmen - businessmen, looking after the profits of their class, did not want an efficient OPA to keep prices low. Again, Congress was pressured by the powerful farm bloc and food trade lobbies, which opposed low prices. Finally, by the system of checks and balances which characterizes the American government government, Congress functions as a check on any unpleasant inroads that other government agencies, like OPA, might try to make on the “rights of private enterprise.” OPA was “checked” almost out of existence.

Black Market Result of Profit Motive

With the profit motive running like a black plague throughout both industry and government, the development of a virulent black market was inevitable.

The black market flourished most in meats, poultry, textiles and sugar. But it was by no means limited to these commodities. Clothing, furniture, secondhand refrigerators, home equipment, ail these and more were handled by the black market.

It was estimated that the black market cost consumers of this country $2,000,000,000 a year. Just how this estimate was arrived at is hard to say because actually nobody knows what black market prices were paid by every housewife and every consumer in every community. However, housewives needed no statistical confirmation that they were being mercilessly robbed as consumers.

Not only were pocketbooks involved. Health and lives were endangered by the unbelievably filthy conditions under which black markets operated, especially in meat. An investigation on black market meat sources in New York State disclosed revolting conditions. Old shacks, near pigsties and cesspools, were used as slaughter houses. Barns with no refrigeration nor protection against flies and insects were used for storage.

It is an erroneous conception that the black marketeers were new arrivals, war speculators pure and simple, having nothing to do with established business. The investigation of the black market area in New York State showed the illicit link between duly licensed slaughterers, slaughter houses and retailers. The magazine Business Week described black market operators as “solid citizens long established in the meat trade and with good reputations.” Drew Pearson reported that the rye market was cornered by a well known “national food corporation.”

The $1-a-Year Brigands

From the deep sewers of the black market to the marble palaces in Washington, big business spread its controlling grip. Not content to leave matters in the hands of their politicians, the capitalists themselves entered government agencies in droves.

Concerning ourselves only with such government agencies as deal with food and civilian supplies, what do we find? We will just chose a few random illustrations.

J. Spencer Love, president of Burlington Mills Corporation, with forty-four plants producing textiles of all kinds, was head of the textile department of the War Production Board. This corporation is obviously interested in high prices for textiles – and so was Mr. Love, as a WPB $1.00-a-year man. Mr. Love wanted high prices not only for the stockholders of the corporation – among whom he is probably the largest – but the higher prices and the profits of the corporation, the higher the salary and commissions of Mr. Love.

Lawrence B. Sheppard, head of the leather and shoe department of WPB, is the president of the Hanover Shoe Company. How did he help the people through the leather shortage? He turned thumbs down on a simple process that would make shoe soles last longer by 25 to 50 per cent. The process is so simple that it would cost about three cents per pair of shoes. But Mr. Sheppard did not want shoes to last longer. He was looking ahead to the post-war period when leather would again be plentiful. It would, therefore, not be good business to make shoes last longer.

Peeping into the personnel list of the War Food Administration, we pick out Lee Marshall, director of distribution of WFA. Mr. Marshall is head of Continental Baking Company, which is not only a baking company but deals in general foods. Quite unabashed, Mr. Marshall, as a government official, stated: “We have a selfish interest in keeping stocks as low as possible.” Whom did he include in that “we”? His company? The WFA? Or both? Undoubtedly both, because he was one of those making the policies of WFA to suit the purposes of business.

How good a job the $1.00-a-year men have done for business can be measured by the amount of profits grabbed during the war. A few figures will suffice for the purpose of showing why business executives so generously give their services to the government for $1.00 a year.

Since meat has been so much on out minds, let us see how the war treated the ever-complaining meat packers. In 1944 the profits of Armour, Cudahy, Hormel, Morrell, Roth, Swift and Wilson were $153,193,000 before taxes as against merely $22,392,000 averaged in 1936-39.

In the textile industry, average profits before taxes in 1944 were $400,000,000 against $28,000,000 in 1936-39.

Here is a list showing the percentages by which profits before taxes rose in the war year 1943 above the peace years 1936-39, in industries in which the consumer is especially interested:



% Profit





Canned and frozen goods


Meat packers


Wholesale grocers up to


Cotton textiles


Department stores


Leather tanning, finishing


This is the extent to which the capitalist government and the capitalists in the government were taking care of their own interests.

Subsidies for the Profiteers

It is exactly these corporations which continue to receive tremendous sum of public money in government subsidies, President Truman, in July, 1945, signed a bill continuing subsidy payments for the next fiscal year. The meat packers, whose profits rose 424 per cent, will get an additional sum of $595,000,000 and for nothing. The dairy companies, whose profits rose 250 per cent, will be paid $100,000,000 as a butter subsidy. The Hour merchants, probably including the wholesale grocers, whose profits rose up to 500 per cent, will receive $ 190,000,000 for the flour subsidy.

Such legalized graft was going on during the war – and continues. Chester Bowles, OPA head, pointed out that of $1,250,000,000 paid in food subsidies, the consumer benefitted by only $378,000,000 – a very small fraction indeed.

The Battle of the Cost of Living Bulge

Instead of keeping prices down, the government tampered with facts and figures. A poor substitute!

A brief review of the battle royal that raged between the unions and the government on the subject of the cost of living is here in order.

Because the government had frozen wages by the Little Steel formula, it wanted to make it appear that prices had not gone up very much. The unions, on the other hand, knowing that their members were losing in the fight to meet the skyrocketing cost of living, wanted to arrive at the truth about prices.

In January, 1944, the CIO and AFL issued a joint report. Their method of investigation was very thorough. The unions estimated, through expert economists whom they employed, that the cost of living went up 43.5 per cent from 1941 to the end of 1943! But still they could not truly evaluate the deterioration in quality, the disappearance of low-priced merchandise, the discontinuance of special sales, the irregularities of ceiling violations and the constantly soaring black market prices.

Then the government’s Bureau of Labor Statistics came out with a counter report that the cost of living went up only 23.4 per cent in that time. It was immediately plain to every working man that this fantastically low figure was a lie to make it appear that the worker had not been robbed too much by the Little Steel formula.

By the end of 1944, however, the government was admitting an increase of 30 per cent in prices – as against the unions’ claims of 45 per cent.

The same Bureau of Labor Statistics admitted on another occasion:

The burdens of the war have been borne by nearly all factory workers, in the form either of a reduced scale of living or of harder work without material improvement in current living. Any gains made in spendable earnings have been small.

The Embittered Housewife

No review of the war food situation would be complete without considering the position of the working class housewife.

In the early days of the war the housewife tried to expose OPA violations and to resist the black market. Some committees were formed and complaints were made to the OPA. But soon disillusionment came. Their efforts availed them nothing because the whole policy of the government and business was against them.

When a housewife threatened to turn a meat dealer over to the OPA for charging 85 cents for a pound of chuck, and he said: “Go ahead!” she understood that the dealer had nothing to fear from the OPA.

Or when she protested against paying for three fourths of a pound of fat with every pound of meat, thus almost doubling the price, and the butcher snapped: “Do you want it or not? I’m busy!” she knew that she either had to allow herself to be mulcted or do without the meat.

But, then, why should the butcher have been more law-abiding than the lawmakers? For Senator Bushfield, of South Dakota, announced, quite openly and without blushing, his intention to get meat “Wherever I can.”

New York City’s Mayor LaGuardia made himself particularly obnoxious in his radio talks to housewives. The “Little Flower” used the situation as an occasion for self-expression. His main line was to exhort housewives to be good, not pay black market prices, observe meatless days – but this was mere mockery since nothing was done to make “white” market food and goods available.

In Conclusion

The total picture of the food situation in this country during World War II adds up to another classical example of the functioning of private enterprise and capitalist government for the sake of profits, with a callous disregard for human welfare.

Artificially created shortages, government agencies conspiring with big business, manipulations by $1.00-a-year executives, government lying about the cost of living, OPA failure, government subsidies to war profiteers, insincere exhortations to housewives not to pay black market prices when the alternative is to go hungry, the ruthless black market – all adding up to the greatest profits in history made out of the wherewithal of life. Such is the composite picture – against the bloody background of the most terrible war in history.

There is no more vivid argument for the nationalization of industry and a workers’ government!

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