Impact & Comment

Businessmen, still sharing the general euphoria over the "industrial statesmanship" of the steel contract, were startled by U.S. Steel's unexpected price increase. Their initial instinct was to applaud Roger Blough's dramatic affirmation of the right of a businessman in a democratic, free-enterprise society to set his own prices. But as the week went on, and Blough himself made clear that he had no such defiant design in mind, and had simply underestimated the probable Administration and public reaction, another current of opinion set in. Stupidly handled, even if economically justified, was now the view.

By Any Definition. When news of the price rise broke, Chairman Avery Adams of Jones & Laughlin Steel said: "We certainly don't accept the President's statement that this was an irresponsible act. We are dealing with increases in labor costs of 50-c- an hour since 1958. That is clearly inflationary by any definition that any economist might want to apply."

Some businessmen, themselves caught in a cost-price squeeze, welcomed U.S. Steel's move as a justification for raising their own prices. Judson Sayre, head of Borg-Warner's Norge Division, said that "the appliance industry would be justified in increasing prices up to 5%." In similar vein, makers of screws and ships, prefab buildings and Pullman cars also mapped raises.

"Lousy Timing." On the wisdom of his timing, Blough found few defenders. Said Builder Del Webb: "I wouldn't think the steel industry used good judgment in raising prices immediately after a labor settlement. But it would have had to come sooner or later." More bluntly, Howard A. Williams, purchasing director of Cleveland's Eaton Manufacturing Co. (auto and aircraft parts) declared: "What's bad about the increase was the lousy timing."

Another common reservation, reflecting the social consciousness peculiar to 20th century American industry, was that although a businessman has a right to set his own prices, he should exercise "responsibility" in doing so. Said President George Killion of American President Lines, a Treasurer of the Democratic National Committee during the Truman era: "If the rise in steel prices was really needed, it should have been adequately explained to the appropriate federal agencies, with adequate preparation and groundwork. It should not have been a coldblooded action taken out of the blue. A private company's responsibilities to the public transcend its responsibilities to its stockholders."

"The Worst Blunder." When White House pressure grew stronger, many businessmen became loudly critical of both Kennedy and Blough. A Los Angeles aerospace executive called the sudden raise "the worst blunder by the steel industry since the days when they called up strikebreakers to shoot at the workers." Said the head of a sugar company: "Maybe the steel people did need a price increase, but going about it in the way they did puts a plague on all our houses." The business community was plainly apprehensive of Kennedy's wrath. Said Willard F. Rockwell, chairman of Rockwell-Standard Corp. (axles and frames): "Kennedy's press conference performance showed a most vicious attitude toward business. What kind of justice is it--when one guy steps out of line to punish us all for being in business?"

Worries that the White House would declare war on the whole business community were reflected in the stock market. U.S. Steel dropped 1 1/8 to 67 3/8, its lowest level since 1958, and the Dow-Jones industrial index suffered its worst break since last September, plunging in a single day's trading to 685.67--a drop of 9.23 points. But the market began to firm as Inland Steel broke ranks, and in the 15 minutes after Bethlehem Steel retreated from its price increase, the market rallied to close at 687.90.

Businessmen presumed that a crisis had been averted, although they feared that, over the long haul, John Kennedy would begin to listen harder to his activist economic advisers, who want him to intervene more often and more forcefully in the affairs of business. At very least, the atmosphere was plainly not conducive to price increases of any kind. In San Francisco, the nation's "blue jean king," President Walter Haas of Levi Strauss & Co., had planned to raise his own prices by 3%--though he had condemned the steel price rise as "unconscionable." In one of the week's most notable non sequiturs, Haas quickly withdrew his raises because "although our business has absolutely no relation to steel, we feel that the impact of any increase would be bad at this time."

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