Let George Do It

The air was filled with sound and fury against sky-high prices last week. President Truman told businessmen that they should cut prices or another round of wage boosts was inevitable. Businessmen did not have to be told that. They were all busy telling each other the same thing.

Jay D. Runkle, board chairman of the National Retail Dry Goods Association, sternly warned retailers: "The prices of consumer goods are too high; the quality too low. Management must limit itself to reasonable profits."

Don G. Mitchell, president of Sylvania Electric Products Inc., snapped that steel prices were so high and profits so fat that "they were going to have to cut prices before they issued first-quarter reports."

Even the National Association of Manufacturers, who had seen no danger of a wild price rise when the N.A.M. was axing OPA to death, was now worried. N.A.M. President Earl Bunting gloomed: "If the constant upward winding of the spiral continues, you'll see one of the most terrible busts this country ever had."

Highest Climb. But this sound & fury signified nothing in the way of price cuts. The magazine Mill & Factory polled businessmen, found that 44% thought prices were too high. But only 15% expected to reduce them by summer. In a nationwide survey, The Wall Street Journal found that virtually no one is going to reduce them now. Profits in many industries were so fat, despite slackening sales, that few were being scared into price cutting.

Confusing the whole issue was the fact that everyone talked as if all prices had gone up the same amount. Actually, the prices of food and clothing, which comprise the greatest part of the cost of living, have gone up the most. So have profits in those industries. Textile profits, up an estimated 219% in 1946 over 1945, are still climbing. Food-company and packinghouse profits are up an estimated 78%.

Hardest Fall. On the other hand, durable-goods makers had done poorly in 1946. Now that they were reaching peak production, they were doing very well. On the basis of General Motors annual report last week Wall Streeters computed that G.M. earned $73 million in the last quarter of 1946, a rate which would pour in a record $292 million in net profits this year --if all went well. But it was the durable-goods industries which were now faced with new wage demands. And there was no guarantee that price cuts would eliminate them. Ford has cut prices--and promised further cuts. But the U.A.W.C.I.0. last week asked for a 23 1/2-c--an-hour pay boost.

Nevertheless, many durable-goods makers could probably afford to cut prices if first-quarter earnings were as high as Wall Streeters guessed. But consumers would be benefited most by--and should get--the biggest cuts in food and textiles, where the profits had been greatest.

But out of fear, or the reluctance of most businessmen to charge less than the traffic would bear, there seemed to be small hope of general price reductions until a drastic drop in buying power forced them. Everyone was content to let George do it. And the longer prices remained unreasonably high, the farther--and faster--they would fall when the inevitable drop came.

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