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March 08, 1953 - Image 4

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Michigan Daily, 1953-03-08

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Should We Abandon Price-Wage Controls?

De Mortuis

(EDITOR'S NOTE: The following article is an-
other in a weekly series of commentaries on
various topics by prominent University faculty
members. The author of today's artiele, Prof.
Gardner Ackley, was Economic Adviser and As-
sistant Director of the Office of Price Stabiliza-
tion from February, 1951, to September, 1952. He
also served for nearly five years in the wartime
Office of Price Administration.)
Professor of Economics
THE EDITORS of The Daily have asked
my views on the question whether it is
wise to abandon price and wage controls at.
this time. In part, my answer depends on
what is meant by "abandon." Let me reviewj
briefly our recent experience with controls,
concentrating not on their accomplishments,
but rather on what I believe to have been
two major errors in their use.
Comprehensive wage and price controls
were imposed on January 26, 1951. At that
time each seller's price for almost every
commodity or service was frozen at the
highest level he had charged during the
period December 19, 1950, to January 26,
1951. Wage rates were frozen at the levels
in effect on January 25, 1951.
Almost without exception, the prices and
wage rates frozen by that action were the
highest in our history. During the seven
months following the invasion of South
Korea on June 24, 1950, the Consumers'
Price Index (the so-called "cost-of-living")
had advanced about eight percent. But there
was plenty of reason to believe that retail
prices would have to go even higher.
Retail prices normally move more slowly
than others, and the Wholesale Price Index
had advanced sixteen percent during the
same period, while sensitive raw materials
prices had soared an astronomical forty-
five percent. Over this same period, average
hourly earnings in manufacturing had
climbed about seven and one-half percent,
although this overestimates the rise in wage
During December 1950 and January 1951,
prices and wages were rising even more
rapidly than the above figures suggest. A
frantic chase of prices and costs, wages and
the cost-of-living, was well under way. This
spiral was based almost entirely upon spec-
ulation and fear. The Federal Government
was not then contributing to inflation by
running a deficit; on the contrary the so-
called Federal "cash budget" showed a more
than five billion dollar surplus in the year
ended June 30, 1951. But businessmen and
consumers alike feared that the expanded
military expenditure program required to
counter Communist aggression would in the
future produce inflation and shortages. Nat-
urally, they rushed to buy, and this produced
the very inflation which they feared. Talk
about the imminent use of price controls
also contributed to the boosting of prices,
as many sellers tried to beat the freeze.
There was really no choice in January but
to clamp down comprehensive controls.
The only question-and it is a legitimate

one-is why controls were not employed
earlier, before the situation got out of
hand. Or, even in late January, why did
the government not freeze prices at the
levels of, say, December 1, a period before
the speculative fever had attained the
hectic proportions reached in late Jan-
The answer to these questions cannot be
attempted here. The' explanation involves
many factors, personal, administrative, and
economic. It is my considered judgment
that our record for that period is one of
rather miserable failure. It is possible, for
example, that timely use of selective controls
beginning in December or even November
might have avoided the necessity for com-
prehensive controls, or at least made com-
prehensive controls possible with far less
confusion and distortion.
This was major error number one. Could
it have been avoided? It is my contention
that there would have been much greater
chance for intelligent action had there been
in existence on June 24, 1950, (a) standby
legislation authorizing controls in case of
an emergency ,and (b) even more import-
ant, a small staff which would have done
some thinking about, and prepared some
plans for dealing with various kinds of in-
flationary developments. Legal authority for
price-wage controls did not exist until Sep-
tember 8, and even a skeleton control staff
did not begin to exist before December 1.
More significant, there were no draft regu-
lations; no carefully-thought-out analyses,
no competent evaluation, of the lessons of
previous experience, no agreed -upon state-
-ment of objectives, no plan of organization.
Thus, I am opposed to the abandonment
of controls if abandonment means that we
go back to where we were on June 24, 1950.
Much as I should hate to see the United
States again resort to wage and price
controls, in this uncertain world it is sen-
seless not to be prepared, in an economic
as well as a military way, for whatever
crises the future may bring.
To return now to the chronology of events.
For six months or so following the freeze,
inflationary pressures remained intense, al-
though the speculative fever which had large-
ly created the previous inflation cooled rap-
idly. During this period, the control agencies
struggled painfully with the mess which they
inherited from the ill-timed freeze. In the
process, some further wage and price in-
creases were allowed, partly required by an
imperfect law, partly again because of a
lack of readiness to deal with the problems.
But increases were also required because
the structUre of wages and prices had be-
come so distorted during the previous in-
flationary advance. These distortions could
not effectively be removed merely by lower-
ing the prices that were too high. Rather,
most of the straightening-out of the price
structure had to come through allowing in-

BUT BY THE late fall of 1951, a noticeable
easing of inflationary pressures was
evident. Some prices began to drop below
ceilings, particularly where the ceilings re-
flected the more extreme previous infla-
tion. Some sellers did not take full advan-
tage of the price increases permitted by
the weakening amendments which Congress
added to the law in mid-1951. Early in 1952,
attention turned to the suspension of price
controls. Some of the price agency's econo-
mists felt that many controls could be sus-
pended, and, if all went well, a progressive
lifting of controls would be both safe and
wise. Beginning in April, ceilings started to
come off. But the top brass in the stabiliza-
tion agencies and the Administration were
afraid of this program. It was slowed down
to a snail's pace. After the election, nothing
more was done about removing ceilings
awaiting the pleasure of the new Adminis-
The failure to act more quickly and
more boldly in lifting controls seems to
me to have been major error number two.
In part it resulted from a mistaken eco-
nomic forecast, which was based primar-
ily upon repeated gross overestimates of
the extent and acceleration of military
spending, and secondarily upon faulty pro-
jections of consumer spending behavior. In
part, however, it resulted from an improper
appreciation of the role of direct con-
trols in a non-war economy. The basic
reliance for restraining inflation in a
non-war situation must be placed upon
the so-called "indirect controls"-a vigor-
ous tax policy, maximum economy in less-
essential expenditures, and stringent credit
controls. Our record in this respect was
not bad. We did increase taxes sharply
(although not as much as would have
been necessary had the forecast with
respect to military spending and con-
sumer spending been correct), and we did
finally take some of the shackles off the
Federal Reserve System.
If we use our indirect controls intelli-
gently, direct controls in a less-than-full-
war situation become a supplement-a back-
stop to cut off price movements based upon
speculation, to hold the line until the slower
acting indirect controls take hold. To change
the metaphor, they can be used as a shock
absorber. Once the initial shock has been
absorbed, the indirect controls can take
over. Of course, in the event of full war,
direct controls would have to remain in
effect, together with stringent indirect con-
trols, holding back the continuing and 4n-
tense inflationary pressures that full war
would generate.
Thus, when you ask me, "Is it wise to
abandon controls?" I answer "yes and no."
Most of the controls should have come off
earlier. But it would be unsound and un-
wise to abandon them without standby plan-
ning and preparedness.

--Daily-Bill Hampton
"Well . . . give yourself a little time, Ivan. You'll think of something.
The Daily welcomes communications from its readers on matters of
general interest, and will publish all letters which are signed by the writer
and in good taste. Letters exceeding 300 words in length, defamatory or
libelous letters, and letters which for any reason are not in good taste will
be condensed, edited or withheld from publication at the discretion of the

Daily Sports Editor, 1921
In Three Worlds at ''
(EDITOR'S NOTE: Prof. Angell, of the sociology department, was
sports editor of The Daily from 1920-21. He graduated from the University
in 1921, and went on to receive his Ph.D. from this institution in 1924. A
distinguished author and sociologist, he was chairman of the University
sociology department from 1940-52. In 1949, he served as acting chairman
of the social science department of UNESCO in Paris; at present, he is a
vice-chairman of the U. S. National Commission for UNESCO.
This is the third in a series of articles by prominent Daily alumni re-
evaluating their college life in terms of their later experience.)
WE ALUMNI looking back a generation to our college days naturally
evaluate our undergraduate experiences in terms of the life we
have since led. Our analysis can only be helpful to you, the present
crop of Michigan men, on the assumption that the world of tomorrow
is going to be much like the world that we have known. Because I be-
lieve, alas, that there is only too much truth in that assumption, I
am willing to contribute to this series. Even though you escape such
a dreadful economic collapse as that of the 'thirties, even though you
do not serve more than once in the armed forces, you are sure to live
through harrowing times and to participate in the making of crucial
Like many college students before and since, I lived in three
fairly distinct worlds-the small circle of my fraternity, the broad
vistas opening up from the classroom, and the hurly-burly of cam-
pus activities. Each of these contributed something distinctive to
my development. From the first I gained the confidence that only
the support of warm friends can give. How significant this was is
perhaps shown by the fact that I am still close to half a dozen of
my fraternity classmates. From the second world I gained the
orientation and enthusiasm for my life work. Let no student of to-
day suppose that his career is any less dependent on the fruits of
his academic world.
It is to the third world, that of campus activities, that I wish to.
turn my chief attention, and especially to The Daily. Two years of play-
ing on the tennis team were a source of great fun, especially since we
were a congenial group and were so fortunate as to swing through
the East both years; but this like dancing in the, male chorus of the
Michigan Union Opera, was rather a minor episode. The Daily was
something different. This called for steady effort, day in day out, week
in week out, throughout the academic year. I am afraid most of us
put ourselves into it more conscientiously than we did into our courses.
There was certainly a measure of real discipline here. I would not
stress its importance, however, for I have long believed that if those
who participate in campus activities tend to be successful in life it is
mostly because they came to college as energetic, industrious young
persons, and simply carried on in their characteristic way through the
University and beyond. No, I would emphasize quite another aspect
of the matter, at least in my own case.
The Daily was where I met many kinds and conditions of
students. My fraternity, like almost all such groups, consisted of
boys from very similar backgrounds. We had a good time together
and we gave each other mutual support but we did not represent
to one another different ways of life and thus open up challenging
perspectives. In considerable measure The Daily did this. When
one worked until one or two in the morning before the paper was
"put to bed," one got to know the other members of the night
crew pretty well. While waiting for the concert reviewer or some
late reporter to type his story, we had plenty of time for the
anecdotal gossip that is so revealing of life positions and pros-
Valuable as The Daily was in this respect, it could not give me
the fullness of insight that would have been desirable. Two groups
were not represented at all-foreign students and Americans who had
to be completely self-supporting. I now regret that I did not somehow
become more intimate with members of these groups. The fact of the
matter is that, even if I had then felt as strongly as I now do, the
social structure of the campus would have made it rather difficult.
Things are better in this respect today. Men's dormitories,
which were then non-existent, offer an opportunity for natural
mingling among many types of students. This is indeed fortunate
since, if anything, the need for understanding those from different
class backgrounds and from other nations has increased since
my day. The world is posing problems that can only be solved
by the joint and comprehending efforts of widely diverse groups.
As a matter of fact, dormitories seem to make possible an inter-
penetration of the three worlds that were largely separate for me. A
diversified yet congenial group in a dormitory can yield a sense of
solidarity at the same time that it is opening up fresh perspectives,
and these perspectives can enrich the meaning of academic work.
Whether or not this actually occurs in any marked degree, I do not
know. But the opportunity is there and it is one which my own exper-
ience strongly suggests that you seize.



At the Orpheum.. . '
THE BIG DAY (Jour de Fete), with Jac-
ques Tati.
ORPHEUM cinemagoers are being intro-
duced this weekend to an interesting
French new comedian. The comedy of Jaques
Tati is a comedy of errors. Tati is the eternal
bungler. It is a relief to find a comic that
evokes wholesome laughter from an audience
while descending neither to the pie-throw-
ing stage nor relying strictly on a battery
of gags.%
Tati comes from the decreasing ranks of
first-class pantomime comedians. Language
difficultiesvanish with a well-placed grim-
ace or a neat acrobatic stunt.
Unfortunately for all concerned, the
vehicle for Tati's debut is barren of any
interest by itself. Without Tati it would
fare worse than a Fitzpatrick travel-talk.
The story is of a tiny carnival's annual
visit to a small French village. During the
cqurse of the festivities the peasants are
treated to an American film, extolling
the virtues of the U. S. postal service. The
bicycle riding village postman, Tati, suf-
fers by comparison with the American heli-
copter mail deliveries. Goaded on by the
villagers, he tries to modernize his own
bicycle-made deliveries. His misadventures
are the meat of the film.,
The village life depicted has so little to
offer dramatically, that before Tati makes
his appearance, many of the customers bad
already departed from the theater.
The picture is short and allows the man-
agement to present five cartoons from the
Near Sighted Mr. Magoo series. So skillfully
done are these UPA products, that the
filmgoer appreciates them more each time
he views them.
--Harland Britz
THE NORTH ATLANTIC alliance shows
some signs of coming apart at the seams
on its own account. France is weak and
overcommitted, and its weakness is now
holding up the whole movement toward
federation in a European Defense Commun-
ity. Even with large grants of aid, the
French doubt that they can maintain both


WASHINGTON-Evidently early reports
have misrepresented Secretary of State
John Foster Dulles's approach to the gi-
gantic problem of reorganizing and admin-
istering his new department. It has been
alleged that' Dulles was following the sys-
tem of the legendary Russian pursued by
wolves, throwing any State Department em-
ployee to Sen. Joseph R. McCarthy in the
happy hope of escaping himself.
This has now been proven wrong in the
highly significant case of. John Carter
Vincent, which has been too much obscur-
ed by the rush of other events. In this
case, Secretary Dulles assumed personal
responsibility for deciding Vincent's fate,
after the Truman Loyalty Review Board
had held that this intensely controversial
foreign service office was doubtfully loyal.
Dulles took his responsibility extremely
seriously. He read through the whole long
record of the charges against Vincent, be-
fore the Senate Internal Security Com-
mittee and elsewhere. He considered other
evidence that was also presented to him.
He talked with Vincent. In the end, he con-
cluded that there was no doubt about Vin-
cent's loyalty, but that there were grave
doubts about his wisdom-th'at, in short,
Vincent was a perfectly loyal American but
a silly fellow.
On the basis of this judgment, Secretary
Dulles allowed Vincent to resign with full
pension rights. The difference between the
Dulles decision and the prior decision of the
Lolalty Review Board was the difference be-
tween firing a cook for burning the roast,
and charging a cook with being a profes-
sional poisoner. The difference was instant-
ly recognized by Sens. McCarthy and Pat
McCarran.zThey had, in effect, charged Vin-
cent with being a professional poisoner of
the worst kind. They at once denounced
Dulles for his action in the bitterest terms.
But the Dulles decision in the Vincent
case was also bold in another way. Be-

denz was untruthful when he made his
charge against Vincent, or Vincent lied in
his denials. It is singularly significant that
a brilliant and seasoned lawyer, with the
conservative cast of mind and strongly
judicial temperament of John Foster Dulles,
should have decided this conflict in favor
of Vincent after the most laborious review
of all the evidence.
If Dulles thinks Vincent was telling the
truth in denying membership in the Com-
munist party, then he must also thing that
Budenz foreswore himself when he declared
ur der oath that Vincent was a Communist
party member. This clearly implied judg-
ment by Dulles is all the more significant,
when taken in conjunction with the Justice
Department's handling of the case of that
other silly fellow who has leen transformed
into a national bugaboo, Owen Lattimore.
In the Lattinore case, there was the
same either/or proposition as in the Vin-
cent case. Either Budenz was untruthful
in accusing Lattimore of being a Com-
munist, or Lattimore was untruthful in
denying Budenz's charge. If Lattimore
committed perjury at all, this was certain-
ly his most flagrant and positive perjury.
Yet the Justice Department apparently
preferred to spare Budenz from hostile
cross-examination. At any rate, the de-
partment left out the main charge, and
based the Lattimore indictment on a series
of wholly subsidiary and relatively trivial
statements contained in Lattimore's ramb-
ling testimony.
Any show of lack of faith in Louis Bu-
denz is a flagrant affront to Sens. McCarthy
and McCarran, who have used Budenz as
the chief witness in their prosecutions. From
every standpoint, therefore, the settlement
of the Vincent case indicates that Secre-
tary Dulles is entirely prepared to stand up
to Sen. McCarthy,
The opposite impression has been creat-
ed. But this was only because the State


Book Exchange .. .
To the Editor:
STUDENTS seem primarily con
cerned with what is wrong
or what should be done and i
not being done, so after fou
years in Student Government thi
comes as a new job to me.
I wish to call attention to some
thing that is right for once-
something which was done pretty
much as it should have been done
Through the strong co-operation
of many organizations and in
dividual students, the Studen
Book Exchange did well over twice
the business this semester that it
has ever done before. I wish that
I could thank all who helped in
the Exchange and on book col-
lections personally and individ-
ually-but I must study too.
My sincerest thanks go to the
officers and men of Alpha Phi
Omega; to the councils and men
and women in South Quad, Alice
Lloyd, Stockwell, East Quad, West
Quad, and the rest; to the S.L.
and its dorm representatives; to
Mr. Vail and the Economics De-
partment; and to all those others
who contributed so generously of
their time. It was your Exchange
and you made it a good one-may
you continue to be as successful.
-Keith Beers, Manager
Student Book Exchange
Rifle Club Funds .. .
To the Editor:
WISH to bring a shameful sit-
uation to the attention of the
student body. An organization on
this campus is in need of both
financial assistance and moral sup-
port. So far these have been with-
held. This organizatonbof which
I speak is the U. of M. Rifle Club.
This year the club has won such
honors as the Big Ten Rifle Cham-
pionship and the Illinois Invita-
tional Rifle Tournament. The club
is, however. unknown to the ma-
jority of students on campus. The
students hear about the club very
seldom because it is regarded as
one of the lesser campushorgani-
zations by the people who print
the news.
The financial problem of the
club is even more depressing to
the members. The only sources of
income the club has at the pres-
ent time are: one Cinema Guild
movie a year and the one dollar
entrance fee charged new mem-
bers. This is pretty lean pickings.
The club has applied to the ath-
letic department for fundson nu-
merous occasions, but has been re-
fused each time. The club mem-
bers are forced to foot all the bills
for each match fired. This is rough
on the pocketbooks of the none-
too-wealthy shooters. Many col-
leges regard rifle shooting as a
major sport and spend thousands
of dollars each year transporting,
equipping, and training rifle
teams. The University of Mary-
land Rifle Team travels as many
miles as does the football team.
I don't mean to imply that U. of
M. should follow a like policy, but
it would be nice if the club could
have a little financial assistance.

stitutional convention held on
November 23, 1952, and with my
intimacy with this Association, I
would say that the ISA council
(now, House) is a breeding and
training ground of future dictators.
S This is proved by the methods
radopted by the recent election
s committee to "elect" the represen-
tatives from various national and
-regional groups - organized and
unorganized. The methods adopted
were such that it would be possible
. to bring the people and only those
people into the House of Repre-
sentatives, who could be influ-
t enced or even controlled by the
present regime. They also made it
possible to bring adelegatefrom
tthe Ukranian group which has
only 5 members (according to the
foreign students' directory for
Spring 1953)-the constitution
clearly states that a group must
have a minimum of 10 members
to be entitled to a seat in the
House-a clear violation of the
At a meeting held on March 2,
1953, when a member who was
aware of all these subversive meth-
ods of the election committee ask-
ed the President to be allowed to
speak the Executive Secretary dic-
tates the President "Shut him
I need not mention any further
details, either about the tactics of
this ISA clique or their behavior at
the meetings. It is now up to every
foreign student (every foreign stu-
dent is automatically a member of
the ISA) to investigate into this
matter and utilize this association
to promote friendly relations and
better understanding amongst var-
ious national groups and also be-
tween foreign students and Amer-
icans and not let this Association
be used for furtherance of selfish
interests of a few as is the case
-Herman G. Raju
Worlid Investment .. .
To the Editor:
BARBARA Ward Jackson's idea
of international welfare or in-
vestment, she used both terms,
certainly sounds like another at-
tempt to fleece the United States'
out of some more dollar aid. No
doubt when she proposed that the
nations with the highest per capita
incomes "donate" 2% of their totalI
incomes to build roads, railroads,
electric power plants and similar
utilities in backward nations, she
had her own idea who those "rich"
nations were.
Not only that but she wants to'
take the 2% "donation" from the
nation's total income. This is en-
tirely different from the taxable
income. This shows that she knows
how to get the greatest amount of
money with the smallest percent-
age figure. Under her plan a farm-
er would "donate" 2% of the total'
value of his crops, or the small
businessman would 'donate" 1 % of
the value of his annual sales,
which in both cases may be 40%
of his income; assuming that he
makes a 5% profit on his invest-



(Continued from Page 2)
Coming Events
Motion Picture. Ten-minute film,
"Hydra," shown Mon. through Sat. at
10:30, 12:30, 3, and 4 o'clock and on Sun.
at 3 and 4 o'clock only, 4th floor,
University Museums Building.
Motion Pictures, auspices of the
American Institute of Architects, Uni-
versity of Michigan Student Branch.
Bridging San Francisco Bay, and Build-
ing for the Nations (color). 4 p.m., Mon.,
March 9, Architecture Auditorium. No
admission charge.
La Petite Causette will meet tomor-
row from 3:30 to 5 p.m. in the North
Cafeteria, Union. All interested students
Russian Circle. Meeting on Mon., Mar.
9, 8 p.m., International Center. The club
will discuss their coming play.
Society for Peaceful Alternatives.
Meeting, Tues., March 10, 7:30 p.m.,
Room 3M, Union. Plans for this se-
mester's activities will be discussed
and decided upon. Election of officers.
All are welcome.
governments and a sound currency
are very attractive to private cap-
ital. We look at: Canada, Vene-
zuela, Saudi Arabia, West Ger-

I~Ztc~p1au &tzl

Sixty-Third Year

Edited and managed by students of
the University of Michigan under the
authority of the Board in Control of
Student Publications.
Editorial Staff
Crawford Young .....Managing Editor
Barnes Connable.........City Editor
Cal Samra .... ......Editorial Director
Zander Hollander . , eature Editor
Sid Klaus... Associate City Editor
Harland Britt........Associate Editor
Donna Hendleman .... Associate Editor
Ed Whipple............Sports Editor
John Jenks ... Associate Sports Editor
Dick Sewell ... Associate Sports Editor
Lorraine Butler.. .Women's EditMt
Mary Jane Mills, Assoc. Women's Editor
Don Campbell .... Chief Photographer
Business Staff
Al Green ......... Business Manager
Milt Goetz......Advertising Manager
Diane Johnston. ...Assoc. Business Mgr.
Judy Loehnberg.. ..Finance Manager
Flarlean Han kin . ,. Circulation Manager



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