Inflation and the Control Market Economy

...No sooner had beef prices temporarily stopped climbing than the cattlemen's solicitous friends in Congress sprang to the rescue...

...Fred C. Allvine of the Georgia Institute of Technology, a specialist on the oil industry...

...Federal Trade Commissioner Mayo J. Thompson flatly charges that Americans pay $10 billion extra each year to businessmen because "price fixing is almost universal...

...Unions are now engaged in a completely comprehensible and thoroughly justified offensive that has so far produced average wage hikes in excess of 10 per cent along with a growing number of strikes and job actions, particularly among municipal employes...

...As ever, there is the traditional answer of antitrust...

...Dairy and meat import quotas, for instance, help keep the cost of living high...

...Had they been compelled to fork over that year's average effective corporate rate, the Treasury would have collected an additional $2.5 billion...

...In the second quarter of this year General Motors profits were 60 per cent below the corresponding 1973 period...

...Economists understand competitive markets...

...According to the Wall Street Journal, profits in general are 25.6 per cent higher than they were at midyear 1973...

...All by themselves the oil companies enjoyed a S3 billion annual tax break...

...When David Rockefeller expresses the thought that such a calamity is not impossible, it may be time for the rest of us to take to the hills with a copy of Harry Browne's latest survival guide in hand...

...If not antitrust, then what...

...Thus it is too late to avoid a renewed bout of cost-push inflation, stimulated almost entirely by the ability of corporations to grab more than their share of the economic pie...

...Because the affluent are paying less, Congress and the White House have relied ever more heavily upon payroll taxes that impinge most seriously upon low-and moderate-income families...

...Indeed, as John Stuart Mill said in 1848, economics is a science only when it is concerned with perfect market freedom...

...Exporters can enlarge profits through the fancy Nixon bonanza of a Disc (Domestic Investment Sales Corporation...

...The energy companies were not the only beneficiaries of public largesse...

...In this feature of industrial organization is to be found the simple explanation of such apparent anomalies as higher prices and lower sales of autos or the malign combination of rising unemployment and escalating wages in the building trades...

...After telling the nation in late July of his iron resolve to curb inflation...

...Yet the government won a famous victory against the oil trust in 1911-food for thought...

...Unfortunately, the American affection for size renders radical antitrust an almost inevitable nonstarter, a faded passion of American reform, to borrow the late Richard Hofstadter's apt language...

...In 1971, for instance, not a particularly profitable year, five of the largest firms (Gulf, Mobil, Standard of California, Texaco, and Exxon) earned before-tax profits of $7.5 billion and paid $375 million in total domestic taxes, a bare 5 per cent...

...University and public school teachers protect their jobs by holding firm the credentials barriers and adhering to tenure arrangements that serve both the legitimate goal of academic freedom and the economic interest of holding off the hordes clamoring at the gates for employment...

...Why go on...

...The percentage of white income earned by blacks continues to decline from 1970's 61 per cent (itself no occasion for celebration) to 1973's 58 per cent, or about the same level as in 1966...

...Nor is this quite the end of the connection between concentrated corporate power and double-digit inflation...

...and so on...

...Unemployment among building tradesmen is soaring...

...Obviously there is no hope of such an initiative from the prospective policies of the Ford Administration...

...Last July 25 a Federal court found A & P guilty of fixing both wholesale and retail prices of fresh meat in violation of the antitrust statutes...

...Since Social Security deductions are accurately perceived as taxes, their steady escalation has operated as still another pressure upon union negotiators to aim at fatter contract agreements...

...Local bar associations circulate minimum fee schedules to avert threats from enterprising barristers who might draw more business by writing cheap wills and contracts...

...There is still a good deal of competition (albeit diminishing) in retailing, truck farming, a few manufacturing specialties such as clothing and printing, occasionally in construction, and, with serious reservations, some of the professions...

...The condition of the black community is naturally even worse...

...Who says it makes no difference whether Democrats or Republicans are in power...

...The lighter imposts levied on corporations and high-income individuals during the Nixon era served to constrict Treasury receipts, enlarge Federal budgetary deficits and stimulate inflation...

...Not to neglect my own nest, I note that while the market is flooded with eager holders of fresh doctorates, faculty salaries at New York's City University will rise again this year and tenure will continue to protect older, more expensive but not invariably more competent occupants of professorial chairs...

...Indeed, as Thurman Arnold was arguing four decades ago in his Folklore of American Capitalism, the major function of the Sherman Act (now 84 years old) is the performance of occasional ceremonial exorcisms of monopoly that have the effect of reassuring the gullible public and allowing the monopolists to accumulate additional market power, often with the quiet assistance of the Federal government...

...John Kenneth Galbraith, who has devoted his professional career to quarreling with his colleagues about the comparative importance of competition and monopoly in real life, has advanced the reasonable hypothesis that the American economy is divided between a shrinking competitive and an expanding privately planned sector...

...All corporations can enhance their cash flow by deploying Asset Depreciation Range (ADR) provisions that enable them to write off the cost of equipment 20 per cent faster than it actually wears out...

...Can anything be done to remedy the situation short of the millennium...

...Notwithstanding its own precept that Federal deficits stimulate inflation and surpluses cool the condition, the Nixon Administration managed to preside over the largest peacetime deficits in American history...

...When available, mortgages on new homes cost 10 per cent or more...

...The outrageous inequity with which inflation has afflicted poor and rich, wage earner and rentier, explains why still more inflation is virtually inevitable...

...High on the agenda of a reasonably enlightened liberal President in 1977, one can readily predict, will be the issues of corporate power that have so much to do with the intractability of inflation...

...Nevertheless, a flock of new contracts feature first-year wage hikes of as much as 18 per cent...

...As long as they can keep the supply of gasoline relatively tight, they can keep gas away from the dealers who would cut prices and pass on savings to the public,' said Dr...

...President Nixon signed into law a dav or two later a loan guarantee authorizing up to $2 billion in credit to the very cattle growers and feed-lot operators who a year ago were enriching themselves at consumer expense...

...The series of tollgates at which organized private groups exact tribute from the unorganized public generates a steady inflationary pressure and imposes a serious limitation upon the efficacy of budgetary and credit policy...

...From an efficiency standpoint nothing would be lost and from a competitive standpoint much would be gained by fragmenting General Motors (as Senator Philip Hart urges...

...For their part, construction unions, professional societies and licensed crafts do their ingenious best to limit entry into their lucrative mysteries...

...by compelling the oil companies to operate as extraction, transportation, refining, or marketing organizations but not, as currently is the case, all at once...

...The American Medical Association, blessedly reduced in influence as it is, persists in its multi-front battle against foreign practitioners, hospital paraprofessionals and health maintenance organizations...

...Both the automobile companies and the construction unions evidently prefer to sell fewer cars or fewer hours of labor at higher rates...

...Probably at the same time that Agriculture Secretary Earl Butz was making yet another speech in praise of free markets, his department was buying up a major share of the Florida navel orange crop in a worthy effort to prevent a threatened decline in retail orange prices...

...But the rest of the economy-banking, insurance, retail chains, pharmaceuticals, agribusiness, food processing, data processing, and so on-is essentially a planned affair...

...And GM greeted the new President by announcing a hefty increase on its 1975 models, an example the other automakers have already begun to emulate...

...It is remarkable how many of the items I collected point to an insufficiently emphasized connection between rampant inflation and equally rampant exploitation by business and other groups possessing monopoly or quasi-monopoly power...

...Reprinted without comment from the July 29 New York Times: "Despite plentiful supplies of crude oil, the nation's major oil companies in recent weeks have reduced their production of gasoline and have operated their refineries 6-7 per cent below the capacity they were utilizing a year ago...

...Although the discipline is infinitely more technically elegant than it was in Mill's day, its practitioners have embarrassingly little in the way of theoretical explanation of the oligopolies, monopolies, agreements in restraint of trade, collusions among trade groups and politicians, credentials barriers to job entry, and assorted cost- and price-raising activities that in fact characterize American economic organization...

...There is no escape from two generalizations: Large corporations are a permanent feature of this economy...

...The best one can expect is to stagger through the next two-plus years without a major depression...

...In each industry the dominant producer or the two, three, or four leaders who share the market exercise sufficient power to choose within quite wide limits between selling large quantities at lower prices or smaller quantities at higher prices...

...According to FTC data, the steel industry by itself may collect as much as $1.25 billion annually in monopoly profit from customers who at a remove include every car, appliance and house buyer...

...As I have already noted, in the last 18 months the average real earnings of salaried workers have dropped by more than 5 per cent, while profits have bounded upward...

...THE OLD-TIME EXTORTION Inflation and the Controlled Market Ecomony by ROBERT LEKACHMAN In the days before Richard Nixon finally surrendered with a last snarl and whimper, I began to assemble for my own amusement a list of economic atrocities as a change from the tiresome compilation of White House horrors...

...Meanwhile, unemployment edges toward 6 per cent and the real income of blue- and white-collar workers continues to decline...

...At the beginning of his term of office and again at its end, President Nixon professed his belief in the old-time economic religion currently celebrated by Treasury Secretary William Simon...

...In its current form the investment tax credit has reduced tax liabilities without requiring businesses to purchase a single machine more than they would have acquired in the absence of the credit...

...Higher prices are merely one of the consequences of concentrated economic power...

...Under the benign influence of the Nixon Administration, the figure undoubtedly grew by leaps and bounds...

...by placing the multinationals under firm political control...

...In a number of states, too, retail price maintenance allows large appliance manufacturers to harass discounters who threaten to sell at realistic profit margins...

...Possibly more significant is the impact upon the distribution of income...

...This apparent contradiction can be largely explained by the steady decline in the taxes paid by the corporate sector that so generously financed Nixon's political activities...

...The mind boggles at the corresponding 1974 figures...

...The middlemen are screwing with fine impartiality customers and suppliers alike...

...Custom, market control and government intervention systematically operate in industry, craft and profession to raise prices, hold potential competitors at bay and accentuate existing inequities of income and wealth distribution...

...Construction is a disaster area...

...Here are some of the more egregious illustrations of the general situation: - Although supermarket prices inexorably rise, the farmers' share of the food dollar steadily shrinks...

...This represents a quiet redistribution away from moderate-income families toward stockholders, most of whom are far more affluent...

...in Trenton, New Jersey, hard-hats have been demonstrating for jobs...

...The economists said to be in the new President's confidence are George Shultz, Paul McCracken and Arthur Burns, whose successes during the Nixon years were unnotable...

...What counts, after all, is take-home pay...

...On technical grounds, much can be said in favor of seriously applying the antitrust statutes and extending them to cover the conglomerates...

...Similarly, government regulation traditionally assists the oil goliaths in restricting domestic energy supplies and thereby increasing the cost to the consumer...

...As unsold chariots piled up in dealers' lots, GM and its "rivals" responded by raising prices on current models for the fifth time since last autumn...

...and if inflation is to be moderated and rough economic justice among major interest groups done, public authority simply must assert effective control over corporate prices, profits and competitive practices...

...Again in the judgment of the FTC, at least $100 billion of goods and services are sold each year in this country "at prices set by collusion rather than competition...