The Bright Sunlight

When oldtime mine mules were brought to the surface after years in the coal pits, it took them several days to get used to seeing in the sunlight. Wall Street had the same reaction last week when President Eisenhower dropped all wage (and some price) controls, his first big step towards liberating the U.S. economy (see NATIONAL AFFAIRS). Blinking at the sudden sunlight, traders began selling furiously, drove the stock market's Dow-Jones industrial average down 7.61 points in a week to the lowest level of the year.

Simultaneously, corn, wheat and other commodities took their worst tumble in the long slide that began last summer, causing some pessimists to croak that depressions always begin when stocks and commodities fall together. But few businessmen thought that last week's flurry was anything more than an overdue shakeout. Furthermore, the tax season often drops the market in February.

Supply & Demand. The fall in retail and wholesale meat prices under the "glut" of cattle on the market caught the headlines. Actually, retail prices were just catching up with the wholesale drop that started four months ago. In fact, meatmen thought that the glut was due chiefly to the fact that retail prices had not reflected the wholesale drop quickly enough, thus meat piled up that would have been consumed in the ordinary working of supply & demand. Normally, a 10% drop in the retail price of meat boosts consumption about the same amount. So far, retail prices have fallen only about one-third as far as livestock prices, and will probably drop farther. Once they do, the increased consumption will probably clean out the glut.

Nevertheless, businessmen had some worries for the moment. With wage ceilings off, they faced the immediate prospect of wage boosts at a time when price controls had been lifted on only 64% of the items which make up the Government's cost-of-living index. Pending before WSB had been 9,200 requests for boosts for nearly 1,000,000 workers. Automatically the increases would now go into effect.

Freedom & Control. Furthermore, many metals were still controlled, both by allocations and by price ceilings. For some metals (e.g., lead), now selling below ceiling prices, that was unimportant, but for others, notably copper, it was not. Copper, selling in world markets at 36 1/2-c- a lb., has a domestic ceiling of 24 1/2-c-. On such controlled industries, including steel and aluminum, the wage pressures would put an added squeeze. Since there were still material shortages, it looked as if the Controlled Materials Plan, or a modified version of it, would be kept to allocate metals.

Despite its short-run worries, the long run outlook for business was still bright.

While the drop in agricultural products would nip farm incomes slightly, the drop in the cost of food would bring consumer expenditures nearer the balance they held before World War II sent spending on food v. industrial products soaring. As the food budget dropped, consumers would be able to spend more on industrial products. And in manufacturing, there was no sign of a letup in demand. In the kingpin steel industry, Big Steel's Chairman Ben Fairless reported his company had a 20-week backlog, one of the biggest in its history at this time of year. There was plenty of sun, once people got used to it.

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