Control of Profit Margins?

Seven hundred earnest conferees at the 13th Boston Conference on Distribution last week heard some startling crystal gazing on the future of price control. The gazer: black-forelocked, apple-cheeked Dr. Julius Hirsch, who was Germany's price-control tsar after World War I.

Dr. Hirsch fled Germany in 1933, taught at the University of Copenhagen, fled Denmark last year, arrived in San Francisco the day the first U.S. price ceiling was announced. In Boston last week, he soothed his listeners by saying the U.S. is nowhere near a real "runaway inflation,"* probably never will be. But on how U.S. price controls will develop, he was not so soothing:

> The U.S. will not find the Baruch plan of overall price ceilings feasible, though it is more "efficient" than the Henderson piecemeal plan, and is the one Hitler adopted. It was feasible in Germany only because Hitler had two and a half years of frozen wages behind him, as well as a 30-year-old "system of wage classes," a strong cartel system in industry, and "an administration educated in economic questions for many years."

> The Henderson price system (first practiced, said Hirsch, by King Hammurabi of Babylon some 4,000 years ago) will eventually have to be supplemented by another widely used European mechanism: control of distribution markups and of: mill gross profit margins with an "anti-profiteering and fair price clause." Thus even if import and farm prices resist all controls, processors' and retailers' prices will rise but not spiral with them.

> As this "natural bridge between Baruch . .. and . . . Henderson" is built, in more and more areas market prices will no longer exist. OPA will find it necessary to fix prices by class of producer--high cost, low cost, average. "No price fixing can last," said Dr. Hirsch, "if you do not establish either a control of commodities, by rationing, or of the sellers of commodities, by licensing."

Dr. Hirsch's cheerless Teutonic prophesy did not go unanswered long. Fred Lazarus Jr., chairman of OPA's Retailers' Advisory Committee, who has gone on record as to retailers' readiness to "apply self-controls," served notice that he is dead-set against control of margins and markups by Government. He termed it "the most ineffective device ever invented," added that only "an army of men" could enforce it upon 1,800,000 retailers.

Leon Henderson has already shuddered publicly at the "alarming task," but confessed that "some measures to control retail prices" may prove "desirable." In Canada, about to impose price controls, retailers are already being licensed.

* I.e., of the type Dr. Hirsch failed to stem in 1923. In that year his own father, who had paid premiums for 35 years on a 50,000-mark insurance policy, became 70 and the policy matured. The company paid it with two stamps.

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