THE ECONOMY: The Grey Settlement

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The band struck up Happy Days Are Here Again at a United Steelworkers rally in Buffalo one day last week as silver-maned President David McDonald, a grin of victory on his face, slowly made his way toward the speaker's platform along an aisle jammed with jubilant steelworkers. Crowed McDonald from the platform: "Victory is yours!"

Just about everybody else, from newspaper pundits to steel industry magnates, agreed with Dave McDonald that the steel strike settlement worked out by Vice President Richard M. Nixon and Labor Secretary James P. Mitchell (TIME, Jan. 11) was a victory for the union. Said a top steel executive: "We took a hell of a licking."

Ammunition Shortage. At the outset of their struggle with the union the steelmakers had plenty of backing in their campaign for a noninflationary settlement. In mid-1959 the public was fed up with price upcreep, and so was the Administration. Steelworkers themselves were far from eager to strike for wage increases that would probably be nibbled away by price increases. And with U.S. steel companies losing markets to foreign competition, the industry had a strong new argument for holding down labor costs.

But the industry overreached itself by demanding authority to change plant work rules, succeeded only in uniting the rank and file behind Dave McDonald and his war cry that the bosses were out to "bust the union." When President Eisenhower's Taft-Hartley board met in October, after the strike had dragged on for three months, the fact finders discovered that the steel industry spokesmen, headed by Chief Negotiator R. Conrad Cooper, were unable to present a convincing case on the work-rules issue. "It's very distressing at this stage," said Chairman George William Taylor, "that we are still having trouble defining issues." Taylor's verdict that the industry arguments were "bogged down in generalities" led to a shift in the attitudes of both the U.S. public and the Eisenhower Administration. The President, who had firmly backed the industry's campaign for a noninflationary settlement, began to see that he was fighting beside allies who were short on both ammunition and marksmanship. He began leaning toward the view that it made a lot more sense to head off the economic damage of a prolonged steel strike than to fight out the battle against inflation on the steel industry's thin line.

Grim Alternative. In November Labor Secretary Mitchell escorted Dave McDonald to a secret meeting with President Eisenhower at the White House. McDonald apparently convinced the President that management's terms were so tough that the union would have to go out on strike again when the 80-day Taft-Hartley injunction ran out on Jan. 26. Bent on preventing a renewal of the strike, Ike summoned Vice President Nixon and Secretary Mitchell to the White House shortly before he left on his around-the-world tour, instructed them to push hard to get a settlement.