The Taste of Freedom

To men suddenly loosed after years behind bars, freedom appears variously as a long-delayed right to be celebrated, a privilege to be used with caution, or a new, bewildering responsibility. To U.S. businessmen suddenly loosed last week after five long years behind price bars, the taste of economic freedom was as varied.

As expected, prices increased overnight on scarce materials and products being made at a loss. Procter & Gamble, and other soapmakers, jacked up wholesale soap prices an average of 50%. General Electric and Westinghouse led the way in upping small motors, refrigerators, washers, ironers, etc., from 10% to 60%. Zinc, copper, lead, and tin also zoomed. In the first two days of free trading, the prices of 28 such major commodities jumped (according to an OPA estimate) an average of 7.4%. Some of the leaps were fantastic. Example: glycerin, which had been controlled at 18¢ a pound, jumped 12¢ one day, 30¢ the next, was up to $1 by week’s end. One paint company helplessly told customers: we’ll send the paint, see how much it costs later.

But in steel, the price barometer for the bulk of mass production, there was no rise, despite a $5-per-ton jump in scrap prices. On the basis of nine months’ profits and this quarter’s operations (90% of capacity), most steel companies could easily absorb the scrap increase, and will probably absorb other small cost increases as well.

As long as steel held the line, most automakers, biggest steel users, cautiously did the same, except for General Motors, Crosley and Willys-Overland. But they jittered at the soaring prices of some of their other raw materials (the increase in glycerin and other oils alone would add up to $5 to the price of cars). Like Ford (see Autos), most were still losing money. In hopes that the price rises would ease some of the shortages, they optimistically upped schedules to 94,000 cars and trucks for the week, hoped increased production would make up for the higher costs.

Retailers in general were even more cautious, as more consumers balked at high prices. Department stores blossomed with unseasonable markdowns. Adam Hat Stores, Inc. slashed $10, $12.50 and $15 models to a flat $8.45.

Nevertheless, the Federal Reserve Board did what it could to give the U.S. a Christmas hangover by doing the wrong thing at the wrong time. At a time when U.S. consumers were going into debt twice as fast as ever before, it lifted wartime installment-buying restrictions on charge accounts and any article costing less than $50. But the Board kept controls on durable goods (autos, washing machines, refrigerators, etc.) which comprise two-thirds of installment buying.

Although some price rises were spectacular, most manufacturers and retailers were cautiously holding the line. They knew that the higher prices went now, the more they would fall if & when a recession began.

Actually, a big part of the problem was out of businessmen’s hands. It lay in the hands of John L. Lewis (see NATIONAL AFFAIRS). No one was sure what would happen to prices if there was a long coal strike, a crippling drop in production and another wave of pay demands all around.