STEEL PRICES AND PUBLIC POLICY
Rowen, Hobart
Steel Prices and Public Policy by HOBART ROWEN hat should President Johnson do about steel prices? Or should he do anything at all? These questions, fundamental in examining the proper...
...In price-wage matters, the logical questions are: How far should the President go in asserting the national interest...
...In truth, they have a point and a problem—and they can thank Roger Blough for helping to put them in that box by spotlighting the issue with his 1962 attempt to raise prices...
...It was in this precise area that the late President Kennedy had his classic Donnybrook with United States Steel Chairman Roger Blough in April, 1962...
...The important fact to recognize is that the Federal government in today's complicated society has a vast stake in the decision-making processes of both big business and big labor, and needs ways of expressing the public interest —ways that are compatible with our free enterprise concepts...
...But one thing seems clear right now: The question of the propriety of government intervention in such situations as the steel price controversy would arise less frequently if American business leaders took the initiative in examining some of their basic, key decisions in relation to the public interest...
...The current background is this: President Johnson, disturbed by new increases in some steel product prices and indications that more boosts could be in the making, twice expressed his displeasure at the evident trend, and then asked his Council of Economic Advisers to study the situation and give him a report...
...That he did, only to be stunned by the industry's response—a six dollar per ton price increase across the board...
...Capitalist Utopia...
...But just as the President of the United States cannot ignore any military threat to the security of the nation, neither can he disregard any danger to its economic or moral well-being...
...Some may argue that this implies a contradiction: If the society is free, they may say, then the government must keep out...
...Kennedy himself, when confronted with two "selective" steel price increases later—one on the anniversary of the original six dollars announcement—offered no further opposition, while, fuming in private...
...Johnson, almost would assure a serious wage-price inflation spiral— at a time when no other unsettling threat is on the horizon...
...What worries President Johnson is the prospect that a general rise in steel prices would trigger inflation...
...Ever since the 1962 fracas, however, Washington officialdom has hesitated to cross swords with the men who make steel industry policy...
...largely unjustified, for being anti-business...
...If businessmen would think in broad terms, they would find occasions when adjusting their own special interests to the public welfare would, in the long run, better serve their own interests...
...One of the most successful and practical hardheads of our times, Lyndon Baines Johnson, is suggesting—in effect—that the steel tycoons cut society in on their planning, instead of considering steel a sacrosanct, special preserve...
...An egghead idea...
...But his request for a "report" from his economic advisers is a polite tip to the steel industry that it would be well for its leaders to take a second, long look at steel's pricing policies...
...At the same time, Mr...
...In Pittsburgh and New York, corporation executives grumble that there never seems to be a "right" time to raise steel prices...
...Kennedy carried to the grave a reputation, HOBART ROWEN is business trends editor of Newsweek and the author of the recent book, "The Free Enterprisers: Kennedy, Johnson, and the Business Establishment...
...These questions, fundamental in examining the proper relationship of the Federal government to private decision-making in business, once again demand public attention...
...The President is not calling anybody any names...
...This, chief economic adviser Gardner Ackley tells Mr...
...And: Is there any effective mechanism short of outright controls...
...His request for a report from his economic advisers, though mild enough, is resented by some business interests as an intervention in their private province...
...To be sure, one basic ingredient of the Kennedy-Blough fight is absent: Three years ago, the major steel companies had led President Kennedy to believe they would hold the price line i? he helped them squeeze a non-inflationary wage package out of David McDonald, president of the United Steelworkers Union...
...On the eve of his recent retirement from office, Treasury Undersecretary Robert V. Roosa denounced the most recent upward drift of steel prices as a "bonehead" move by management...
...No such commitment has been made regarding steel wage negotiations that will take place this spring...
...Although Mr...
...The answers will take time to develop, because this is a new testing-ground, just as it is only in the past few years that international monetary affairs have impinged so dramatically on our domestic goals and capabilities...
...Johnson has courageously refused to let the steel industry's price plans go unchallenged...
...Johnson, who know that the President has openly courted business leaders, and, by constantly working at it, has restored the confidence of much of the business community—big business, at least—in a Democratic Administration...
...Interestingly enough, probably no other point so closely brings together AFL-CIO President George Meany and the President of the National Association of Manufacturers as their denial of governmental prerogatives in the area of prices and wages...
...Blough and his followers among the steelmakers withdrew the six dollar price increase in 1962, it was generally felt by most businessmen that President Kennedy had "over-reacted...
...Not in the least...
...And as a consequence, Mr...
...Such a blunt statement is a luxury not available to men continuing in office under Mr...
...Some of the countermeasures he took, and especially some of the uncomplimentary words he uttered, were never forgotten...
...Not only would manufactured products using steel cost more, but advances in other commodity prices would be encouraged by a rise in steel, always a symbol and bellwether in the marketplace...
...Not surprisingly, President Johnson is reluctant to see what promises to be a comfortable and prosperous 1965 transformed instead into a year of ballooning prices...
...That would doubtless bring him into conflict with Chairman William McChesney Martin, Jr., of the Federal Reserve Board, and touch off additional complications in the ever-present worries about the value of the dollar...
...The steel industry, for example, might have concluded at those board meetings in New York, Pittsburgh, and Chicago that a stable price level would protect the dollar and thus be in the nation's—and their own—best interest...
Vol. 29 • February 1965 • No. 3
