Business: Competition Goes Global

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Nowhere was this more visible than in the U.S., where both business and government frequently based their most impor tant economic actions on the need to become more competitive in world markets. The turning point of the year for the U.S. economy—the great steel crisis—seemed a peculiarly domestic fuss. But when U.S. Steel Chairman Roger Blough decided to raise steel prices $6 a ton less than a week after his company had signed its first noninflationary labor contract since the Korean war. he used foreign competition as a justification for his move. Overseas competitors, paying lower wages and operating more modern plants, were able to sell nails, barbed wire and construction rods in U.S. markets at prices that U.S. manufacturers could not match. The foreign challenge in steel was costing the U.S. 40,000 jobs and almost $1 billion in sales a year. What U.S. steelmakers needed, Blough contended, was fatter profits with which to finance modernization of their aging plants.

John F. Kennedy's hasty and white-lipped counterattack against Blough showed the President's belief that he had been doublecrossed: in persuading the United Steelworkers to hold the wage line, the President thought that he had an unspoken promise from Blough to hold the price line. But Kennedy, like Blough, based his case on the exigencies of the world market. A price rise in steel. Kennedy told the nation on TV. would set off another U.S. "inflationary spiral'' that "would make it more difficult to withstand competition from foreign imports, and thus far more difficult to improve our balance-of-payments position and stem the outflow of gold.''

The S.O.B. Club. When things cooled down, many businessmen concluded that Blough had been wrong, and that if the President had only held his temper, the workings of the free market at a time of softness in steel demand would have forced Blough to rescind his price rises within a few weeks anyway. The President won a backdown from Big Steel when Chicago's Inland Steel refused to go along with Blough's move. Inland executives have repeatedly implied that they would not have raised prices even had the President not intervened.