Kennedy and Steel

...The Hew budget which Reginald Maudling, the Chancellor of the Exchequer, presented to Parliament early in April offered the bulk of its tax reliefs to low-income recipients, which is to say that in its search for the national interest in prices and wages a Conservative Government has been willing implicitly to trade off tax benefits for wage restraint—a good deal more than Kennedy's fiscal policies or statements offer American trade unions...

...If anything, recent Kennedy statements have retarded any American initiative...

...The sad fact is that in the last 12 months the Administration has not begun to define the economic principles or study the administrative procedures which are necessary if price changes are to be sorted out according to their public interests...

...Finally, in the President's words, "the psychological effect may cause a more general rise in prices, which may therefore be reflected in additional wage demands...

...In retrospect and in the light of this April's steel price rises, last year's famous victory seems primarily a personal triumph rather than the triumph of a coherent policy...

...Republic and Armco, third and seventh in size, have rescinded a $4.50 increase in steel-plate prices, apparently because neither U.S...

...To draw back from such tasks is to confuse the organization and policies of the concentrated manufacturing industries with the ladies' garment industry...

...Above all, as the President still recognizes, what happens in steel and a number of other industries ramifies throughout the economy, sets off wage demands, enlarges defense costs, and influences the size of our balance-ofpayments deficits...

...And the hand is a losing one precisely because at this critical juncture its holder lacks the cards which coherent policy alone could have supplied...

...In our present, rudderless condition in the whole area of economic policy, something would be gained if the President did nothing more than appoint yet another commission...

...President of the United Steelworkers, to sell this doctrine to union members who note the ability of their employers to get away with price increases...

...What has made this conceptual failure particularly glaring has been the extraordinary adroitness of the industry's handling of its pricing policy this year—in sharp contrast to its bungling of last year...

...An astute group of economists, public officials, union leaders, and corporate managers might at the least cause as much public discussion of prices and wages as the Clay Committee has created on foreign aid policy...

...The industry's leaders still believe that the demand for steel is fundamentally inelastic and that, therefore, price increases diminish sales only slightly and increase revenues substantially...

...Other industries also can be controlled...

...Although President Kennedy urged the steel workers to refrain from wage demands on the ground that "wage stability is the best thing for the unions," it will be hard for David McDonald...

...Thus what we urgently require is a definition of those industries or corporations which are strategically affected with the public interest, a set of rules to govern their pricing policies, and some orderly procedures of investigation and public judgment...

...The price changes covered some but far from all steel products...

...And just to add a last refinement to the portrait of glaringly non-collusive behavior...

...In what promises to be their second boom year in a row, the auto companies are much more likely to embrace steel price increases as a sufficient reason to take full advantage of their good fortune...

...This Board would require selected corporations to give advance notice of their pricing plans...

...Whoever the producer of this year's steel drama might have been, it was not the President of the United States...

...The British in their new agencies—the National Economic Development Council ("Neddy") and the National Incomes Commission ("Nicky")—have at least begun to grapple with the definition of such a policy...

...This year the President contemplates such dangers with equanimity...

...I do not wish to understate the grave difficulties which such adventures in uncharted economic seas entail...

...This year's increases were initiated by Wheeling Steel, the industry's 11th largest producer, not by U.S...

...By imputing bad faith to the steel industry, the President succeeded in turning the episode into a personal confrontation between the President of all Americans and the President of U.S...

...They still cherish the low-volume, high-price behavior which this conviction implies...

...Although later voluntary decreases in steel prices cast some doubt on the urgency of his actions on sheerly economic grounds, Kennedy at the least made it unmistakably clear that when a President deploys the FBI, invokes grand juries, alerts the Department of Justice, unleashes Senator Kefauver and, most effective of all, brings his case to the public, even Big Steel retreats...

...It could then hold these increases in abeyance while it subpoenaed officials and records, held public hearings, and published its findings of fact...

...On April 19, he went as far as to say that the industry "has acted with some restraint...

...In the meantime, the steel industry has scored a clean knockout against an opponent who never put on his gloves...

...President Kennedy has a talent for playing a losing hand gracefully...

...The President muddled the issue and contradicted his own previous position when he declared that "price and wage controls in this one industry while all others are unrestrained would be unfair and inconsistent with our free competitive economy...

...Even preliminary definitions are difficult...

...Not least, it could relieve a President of the necessity for intervention in crises...

...One possibility for the supervising agency is an extension of the public review board procedures with which the United Automobile Workers have experimented...

...The American mixture of remonstrance, ad hoc intervention and helpless acceptance (we have seen all three in the last year) is a poor substitute for even as tentative an approach to the definition of the public interest as Britain has made...

...In making these increases, and in making them stick, the steel industry has reiterated its ancient convictions...

...ACT TWO Kennedy & Steel By Robert Lekachman For a brief moment last April, President Kennedy apparently demonstrated his ability to define the public interest in the pricing policies of large manufacturing corporations and to make his own interpretation stick against the vehement opposition of the affected industry...

...In an economy which is expanding a trifle more rapidly than expected, it is quite possible that the steel price increase will mark the end of the general price stability of the preceding two or three years...

...Even without powers to enforce compliance with its findings, such a Board could in time institutionalize the public interest and exert formidable pressures against rebellious corporations...

...Either a capacity or a profit criterion, or perhaps a combination of the two, would be an appropriate supplement to this rule...

...But regulation which focused on Fortune's 500 largest corporations, or on steel, autos, electrical appliances, aluminum, chemicals and oil refining, would be a promising start...

...As Walter Reuther envisages such an extension, an Administered Price Board would be created...

...As other companies followed Wheeling's lead, they announced price increases on various steel items by various amounts...

...Our economy is "free and competitive" only in patches which do not include the steel industry...

...Steel nor Bethlehem Steel, first and second in the industry, were willing to join them in this particular increase...

...It was a well-staged morality play, but this year's cruel April reveals that the Kennedy-Blough drama was only a one-night stand...

...Steel, the industry's giant...

...As for criteria of supervision, last year the Council of Economic Advisors stated annual productivity changes as the appropriate limit of wage increases...

...Since a President must conserve his powers, he can intervene only infrequently...

...The unlucky Roger Blough never stood much chance, and his own maladroit television defense of the industry's $6 price boost completed the debacle...

...What this country—in common with England, France, Germany and other advanced capitalist nations—badly requires is a coherent wage and price policy, what in England is called an incomes policy...

...Undoubtedly, Department of Defense expenditures will rise and the swollen military budget will be further distended...

...The effects of the industry's action seem potentially even more serious than they appeared last year...

...Nor is there much greater prospect that the auto industry will heed the President's admonition to absorb steel price increases out of their "very high profits...

...It is no more possible today than it was last April to identify the industries, the companies, or the behavior which the Kennedy Administration considers to be affected with a public interest...

...And they still demand profits high enough to finance investment out of retained earnings...

...His April 11 statement characterized "selected price adjustments up or down as prompted by changes in supply and demand" and alleged that they were "not incompatible within a framework of general stability and steel price stability...