Saturday, August 10, 2013

How ‘Stabilization’ Unstabilizes

After much wavering, the Truman Administration was finally brought, months ago, to acknowledge that price control could not work without wage control. But while its price ceilings have been fixed and rigid, its wage ceilings have from the first been vague, movable, and, in fact, fictitious. It has never applied the same principles to wage control as to price control and, to do it justice, it has never applied the same vocabulary. Prices have frankly been fixed; but wages have merely been “stabilized.” Whatever nebulous meaning may once have attached to this word was completely lost in the settlements of the New York trucking and maritime strikes. It was at last made crystal clear that there is no national “wage policy” or “wage line” that cannot be destroyed the moment any powerful union chooses to challenge it through a strike.

The history of these “wage policies” has now become drearily repetitive. The various wage boards set up by the Administration, ostensibly for the purpose of “stabilizing” or holding down wages, have been in reality wage-boosting agencies. The famous 18½-cent wage-increase formula was an open invitation to every labor union leader to demand at least that. He could hardly afford to ask less for his members than the amount the President himself had declared to be only their just due. This “stabilization” policy could be put into effect as long as the government was forcing the oil, motor, steel, and other industries to pay greater increases than the unions could obtain through their own unaided bargaining power. The new 18½-cent higher ceiling was smashed the moment John L. Lewis decided to smash it. The government cooperated with him in smashing it, in fact, by seizing the mines and negotiating and signing the new ceiling-smashing contract with him itself. One consequence of this was the New York trucking strike and its settlement by wage boosts of 31 cents an hour.

The truth is that the government by its own policies has finally placed itself in a position where it must surrender to every strike. It not only fails to penalize; it rewards every strike by giving the strikers more than they would have got without striking. A never-ceasing round of strikes under these circumstances can hardly be regarded as a mystery. Every time the government buys off one present strike by forcing the employers to grant the substance of the demands made it buys itself twenty future strikes.

And it begins by creating a situation in which it is all but impossible for a union to lose a strike. By the Wagner Act the government turned itself, in effect, into a union-organizing agency. One provision of that act makes it in practice impossible for an employer to dismiss men on strike and to hire permanent workers to take their place. Local governments, in addition, fail to provide adequate police protection not only for substitute workers but even for workers who wish to continue peaceably at their old jobs. Under these conditions all the natural risks are taken out of strikes, the previous function of the strikers cannot be taken over by anyone else, vital production must come to a halt, and the deadlock can only be broken by giving in to the strikers’ demands.

The least that we may hope for is that the Administration will candidly recognize the situation it has brought about, and will now give up the pretense that it has any “wage stabilization policy” or that it can enforce any. But the logical and indeed the only workable corollary of abandonment of a wage control that has always been fictitious is an abandonment of price control; otherwise artificial scarcities must continue to be brought about and production must continue to be discouraged, unbalanced and disrupted. Yet the administrators hang on grimly to every inch of price control that the present extension law permits, and even interpret the law to retain far more control than Congress intended.
Though the national production of meat this year was substantially higher than in the prewar years, both the Price Decontrol Board and the Secretary of Agriculture calmly ruled it to be “in short supply.” Restoration of price control then brought about the worst meat shortage in our history.

The government’s “stabilization” policy, in short, continues to create worse difficulties than any it was designed to solve.

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