Danger Sign

Faced with an economic situation showing an increasing tendency to mature into the boom-bust cycle that has always threatened American business, the persons most in touch with events, the business community, have shown little indication that they are willing to deal with the problem in a manner inclined to insure confidence in the future prosperty of the nation. Although a few concerns--Ford, International Harvester, Chrysler to name some--have cut their prices, most have refused to talk about any slashes in their goods until wage negotiations have been completed, and they have swallowed the union's annual bad news.

The obvious result from this short-sightedness is another upward twist in a price spiral already reaching dangerous levels. Most American firms enjoyed fat profits from their 1946 operations. Unions know this almost as well as management, and they would be foolish indeed if they did not take full advantage of it in setting their demands for the coming year. With bargaining power reduced by incontrovertible facts, new highs in labor's terms can be avoided only by the slim margin of union moderation, at a time when unionists are bearing the brunt of a greatly increased cost of living. Labor leaders are under greater pressure than ever from their followers to bring home increased wages. Only the threat of another round of strikes which might be disastrous to the future well-being of their organizations; with Congress showing increased signs of readiness to swing a big axe at the unions, would prevent these leaders from asking for an increased share of industrial profits. Management, faced with another boost in the cost of labor, would again be tempted to raise prices correspondingly, and another inflationary jump would be under way.

With the signs that the boom is increasingly in danger of bursting, any increases in the price of goods would backfire in the not-too-distant future. Consumers are finding it difficult to absorb current production, and the retailers are finding it hard to sell their goods. An R. H. Macy advertisement appealing to manufacturers to cut their prices is the direct result of a bad Easter season. Combined with a presidential request for lower costs, and a warning from their own N.A.M. that they are charging too much, business men have been well warned of future dangers. For concrete examples of what sudden slump would mean, they have samples in the sharp cut of restaurant and night club activity last fall, the spectacle of full-scale fur sales in December, the desperate attempt of liquor companies to head off a price war when liquor sales took a nose dive. These are piecemeal readjustments, the wholesale collapse of an over-expanded price structure would be much worse if for no other reason than its immensity.

Responsibility for working a way out of the bust has been left squarely in the hands of business. A presidential suggestion for industry-wide negotiations for a slash in prices, to cushion their effect, ran into an opinion of the Attorney General that any such agreements would run counter to the Sherman Anti-Trust Law and would be illegal. Since they cannot do it collectively even in the public interest, business men will have to act on their own, in self interest. The nation can only hope that their self-interest operates quickly enough.