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Frank Demby

For Workers’ Control of Price-Fixing

What to Do About the Rise in Prices

(August 1941)

From Labor Action, Vol. 5 No. 31, 4 August 1941, p. 2.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The developing war economy in the United Slates has finally reached the point where every person in the country will feel iis effects in the most direct and immediate sense. It has been announced from Washington that price-fixing legislation will be introduced into Congress this week. The immediate reason for this drastic step is that the inflationary movement of prices is threatening to get out of hand. This would cause a tremendous increase in the cost of the armaments program, as well as a serious weakening of civilian morale. The experiences in World War I and since have taught the capitalists that rapidly rising prices must be prevented at all costs, if they would preserve their system from social disintegration. Labor Action has repeatedly pointed out that the capitalists are face to face with a dilemma that free, competitive capitalism cannot solve. The spending of billions and billions of dollars for war purposes means either inflation or totalitarianism. There is no escape from this dilemma under capitalism. Leon Henderson, director of the Office of Price Administration and Civilian Supply, has already admitted that voluntary control of prices is breaking down. Many corporations simply refuse to abide by the price ceilings, that is, the maximum prices set by Mr. Henderson. Others are getting around the price ceilings by producing articles of inferior quality – without, of course, advertising this fact to the consumer or to the government. Still others are developing a very refined illegal or bootleg trade, especially in certain key raw materials. All of ‘this’ is perfectly natural and inevitable under a capitalism where the urge to obtain profits takes precedence over everything else.

More Money to Buy Less Goods

If a manufacturer finds that his costs have increased due to (1) increased wages as a result of labor’s drive to improve its standard of living or simply to maintain living conditions at existing levels (2) higher prices for raw materials, as a result of higher shipping costs imposed by the war and higher prices for agricultural raw materials as a result of the government’s farm program, or (3) higher taxes, as a result’ of the government’s attempt to defray somewhat the cost of the war program, he will not voluntarily content himself with a reduced profit. He is in business to make the maximum profit possible and his concept of patriotism gives him the moral right, and even the obligation, to pursue his profit-making instincts to the utmost. Moreover, if he should attempt to curb them, he will soon find himself swallowed up by a bigger capitalist. Consequently, he raises the prices of the things he produces and sells.

This development is clearly shown by the fact that wholesale prices have risen almost 50 per cent since the outbreak of World War II and by the current rise in retail prices which is rapidly threatening to equal that of wholesale prices. This development is absolutely irresistible as the war economy expands in size and scope. For it has meant a tremendous increase in available consumer purchasing power, accompanied at the same time by a considerable decrease in the production of consumer goods. The shift from consumer goods industries to war industries is only beginning to get under way in this country, but it will now proceed at a very rapid rate. Putting the matter in its most simple terms, more people have more money with which to buy less and less goods. Prices must go up under such circumstances unless controlled by the government.

Alternatives Under Capitalism

Government control of prices, however, is not a simple matter – as the British and American governments have already learned. If done on a piecemeal basis, it is incomplete and only serves to create antagonisms and dissatisfaction without preventing inflation.

“It is realized by the Administration,” says a dispatch to the New York Times of July 18, “that unless prices are strictly controlled or consumer buying is kept down by some other means, inflation can scarcely be averted. A study of German methods of price control, recently published by the Commerce Department indicated, however, that control of prices is not effective unless (1) all prices are controlled, (2) wages, rents and dividends are also controlled.”

Here, the capitalists run squarely into the second horn of the dilemma. If prices are not controlled, there will be inflation, with all its catastrophic consequences. On the other hand, if prices are controlled, it must be a strict and complete control in order to be effective. Half-way measures will not suffice, as the experience of England clearly shows. The only way that inflation can be prevented under a capitalist war economy is to follow the German method. Rigid control of all prices means complete government control of the entire economy. The government will decide how much profit the capitalist will make, how much rent the landlord should receive, how much wages the worker should get. The government, in effect, will decide where industries are to be built, whose capital and how much of it will be used to build the necessary war industries, what workers will work and where they will work, and under what conditions they will work. Such a complete ordering of ‘people’s lives, by a government, in this era of capitalist decay, means totalitarianism – no matter how pleasantly it may he dressed up by clever propagandists. In other words, the only way that inflation can be prevented under capitalism is through the adoption of fascist, totalitarian methods.

This is already understood by certain sections of the population. It will soon be understood by everyone with eyes to see, for price-fixing means arbitrary control of the dollar. Arbitrary control of the dollar means an attempt to freeze the class struggle. At present, each class in society and each group within each class uses its own peculiar methods of struggle to obtain more dollars. The dollar, so to speak, organizes the class struggle in an orderly manner. If the dollar ceases to have this function, as would be the case under complete price-fixing, a substitute must be found; otherwise, the existing society disintegrates. The only substitute that can be found under existing conditions is the armed might of the state. Soldiers with bayonets and policemen with clubs and revolvers, backed up by the courts and the prisons, will enforce the price-fixing decrees.

To be sure, a workers’ state, that is, a state organized and controlled by the majority of the population in their own interests, could take care of production and price problems through the method of democratic economic planning. This is not in any way to be confused or identified with the barbaric, bureaucratic and totalitarian planning that exists in Stalin’s Russia. In fact, a genuine workers’ state in this country of virtually unlimited natural resources and a very highly developed technique of production based on a high productivity of labor, could probably maintain a war economy, necessitated by the requirements of the struggle against Hitlerisrn, without any decline in the standard of living whatsoever. In fact, a proper utilization of our immense resources, both human and natural, would probably witness a rising standard of living – even under a war economy.

Big Business Defends Its Interests

Unfortunately we do not have a workers’ state at present. Mr. Roosevelt heads a capitalist state. Under a capitalist state, the whole program becomes transformed into one of getting the prices in which you are interested favorably fixed in relation to all other prices. This explains the heavy influx of dollar-a-year big business men into various governmental posts in Washington. “If there must be price-fixing,” say the capitalists, “we’ll do it. Then we can be sure that there will be no interference with our profits.” Senator Bankhead, a representative of the big cotton plantation owners, is reported in the press as having challenged any move toward pegging (fixing) prices of agricultural commodities unless controls were fixed all along the line on wages, salaries, rents and industrial commodities. He also warned that any effort to put a maximum price on cotton, either by direct action on the staple or by fixing a price on manufactured cotton goods which would operate to depress the price of raw cotton below 20 cents a pound, would meet “strenuous and determined opposition from the friends of the farmers in and out of Congress.” The price of cotton, it must be added, is at present about 16 cents a pound, having risen about 6 cents since the beginning of the year. This represents the highest price raw cotton has reached in a decade.

Thus we see the representatives of capitalists and farmers descending on Washington in droves to defend their respective interests in this all-important matter of price-fixing. What are the leaders of the trade unions doing about the matter? So far, except for some pious declarations by Murray and Green against control of wages, the working class has been absolutely silent, as if it were totally unaware that the problem exists NOW.

What the Workers Must Do

The workers cannot take the position that there should be no control of prices, for the workers suffer more than any other section of society from inflation. And yet, of course, the workers would be the real losers from a totalitarian development. This does not mean that the situation is absolutely hopeless. Certain actions can and must be taken First of all, the workers must be educated to understand what is involved in this question of price-fixing. This is primarily the responsibility of the trade unions. They, if they are to do this educational job properly, must immediately get away from the absolutely fatal notion that a totalitarian system developed as a result of the necessity to fix prices will disappear once the war is over. This is 1941 – not 1918. The war is clearly going to be a long and costly one. Even if American imperialism emerges the victor, it will be far too weak to give up the totalitarian controls instituted during wartime.

Secondly, the workers must send their delegations to Washington to defend their own interests in regard to the fixing of prices. The trade unions clearly have the power to do this, provided they have the will.

Thirdly, and most important, the workers must insist on workers’ control of price-fixing. After all the workers represent the overwhelming majority of the population. Why shouldn’t prices be fixed in the interests of this vast majority, rather than (as is now the case) in the interests of a small, exploiting minority? Big business men will never fix prices in the interests of the workers. The democratic method would have the majority fix the prices – since they must be fixed – in the interests of the majority. This could be done very simply in the case of commodity prices, by having a price control board for each commodity or each group of related commodities on which the majority represents the workers. Again, for the fixing of basic prices for wages, rent and interest, there must be a general price control board firmly controlled by the workers. Only in this way can the workers have any guarantee at all that the twin evils of inflation and totalitarianism will be avoided. Of course, in the long run, as I have tried to make clear, the real solution of the problem calls for an end to capitalism and the establishment of a workers’ state as a necessary transitional stop on the road to socialism.

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Last updated: 13.1.2013