Lesson for Socialists

Great Britain's labor government got out of the rubber business last week, thankful that it had lost only the tail of its shirt. After five years of state buying & selling, it declared that the market in rubber would be free: trading will begin next week, private buyers will import crude rubber beginning Jan. 1.

The prime reason for the Government's decision was that supplies far exceed expectations. There was practically the same amount of natural rubber available this year (975,000 tons) as in 1939 (990,000 tons). Estimates for 1947: between 1,112,000 and 1,412,000 tons. But another reason was that Britain has been losing money on its state trading. The Government bought thousands of tons of rubber in Malaya at 23.6/ a pound, thought rubber was scarce enough so it could keep the price pegged at this level. But the high price brought out so much rubber that the price fell to 20.25-c-. This lesson in free enterprise economics can cost Socialist Britain millions.

Just what effect London's action would have on U.S. prices was problematical. As long as the U.S. Government continues buying & selling all crude rubber and controlling the synthetic rubber business, it will make little difference. But the U.S. is expected to permit reopening of the New York market early in 1947. With rubber free on both sides of the Atlantic and with supplies plentiful, prices are likely to drop further. Some guessed that natural rubber would level off around 18-c- a pound in 1947 (4 1/2-c- under the Government's present sales price). If so, the U.S. will have to close down much of its $700 million synthetic industry (price: 18 1/2-c- a pound) or lower its price and subsidize it.

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