PRICES: In the Fog

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The Economic Stabilization Agency last week issued a broad and hazy price proclamation aimed at almost every businessman. ESA asked for a general freeze on prices except farm products (about which ESA can do little), and a rollback of price increases since Dec. 1. The freeze was voluntary, said ESA, but woe to the businessman who didn't obey. ESA warned that anyone who did not cooperate would be punished when "feasible," apparently meaning when ESA makes the order mandatory and gets some price cops.

Just which prices were to be rolled back and which were to be frozen was not clear. Said ESA: "Any price increases after Dec. 1 which are in excess of those that would be permissible . . . will be subject to action." To determine what is "permissible," the Government set up four fuzzily conceived "fair standards":

¶ No manufacturer may boost prices if his profit before taxes is equal to or above his average profit between 1946 and 1949.

¶ A producer who is losing money on any particular product may raise the price of that product enough to 1) "make it profitable," or 2) to compensate for increased manufacturing costs since the start of the Korean war—whichever is lower.

¶ Wholesalers and retailers may not impose higher markups than those of June 1950—unless their profits are below the 1946-49 base period.

¶ Distributors may not boost prices on the basis of higher replacement costs, i.e., out of fear that costs are going up.

No sooner was that news out than ESA fired off a telegram to 250 large manufacturers in every major industry: Would they please notify ESA at least seven days in advance of any planned price increase?

Haberdasher's System? International Harvester Co., which had raised prices 4% only a few days before, promptly announced that the price increases would be withdrawn while it studied ESA's proclamation. Most other businessmen who had raised prices did nothing; they simply did not know what the proclamation meant.

It seemed to mean that those who had taken advantage of scare-buying and jacked their prices this summer would get off scot free; and those who had postponed price increases as long as they could would be punished by a rollback. By the same token, the steel companies which raised their prices on Dec. 1 would be left alone, but manufacturers who raised prices on Dec. 2 to compensate for the steel boost would have to roll them back. Said one Chicagoan: "[Rolling] back prices in the face of higher costs must have been the system Mr. Truman used in [his] haberdashery to insure his going out of business."