Letters to The Editor: Wages and Prices Auditing the Auditor Hill's ...
JOHN KENNETH GALBRAITH.R.E. EICHBERGERRUDOLPH H. MILLER III.GEORGE T. BLEAKLEY.MRS. J( )AI The U 'ashington Tost, Times Herald (1959- /973); Feb I 1, 1969;</br></br>From 1955 to 1960 the consumer price index rose approximately ten points. From 1961 to 1965 it rose by 5.5 points. During the first period there was a sharp increase in wholesale prices. During the second period these were stable. During the earlier period unemployment was between 4.1 and 6.8 per cent. The difference between the two periods, some effects undeniably associated with the small differences in the level of employment, was that between 1961 and 1965 the Kennedy-Johnson Administrations had considerable success in holding wage increases in the organized sector of the economy within the amounts that could be afforded by productivity gains and in enforcing the appropriate price stability. This was the policy of the guideposts. No such policy was in effect before 1961. After 1965 it succumbed to the fiscal pressures of the Vietnam war, and, quite possibly, to a lessened sense of" the importance of the policy. Recent Economic Reports have spoken rather ambiguously of the wickedness of any interference with free markets by price control and the absolute necessity of some interference to insure price stability.</br></br>I have ncr-wish to give Mr. Nixon advice on economics. Like all Presidents he will have more of this than he can use. But I see no reason to spare you. You should know, as your recent editorial on the subject sadly fails to show, that in dispensing with the guideposts, or something similar, he is sacrificing his only chance for reconciling price stability with high employment. The American economy, whatever wishful analysis there may be to the contrary, is not stable at or near full employment. Wages will always shove up prices and prices will always pull up wages and this spiral will revolve for Republicans and Democrats alike. Moveover it has been the experience of virtually every other major industrial country that some machinery for wage and price restraint Is the only alternative to inflation of heavy unemployment.</br></br>In this connection it should be observed that whoever gave the new President that line about relying on ÛÏfine-tuningÛ the economy with monetary and fiscal measures was guilty of a shameless snow job. ÛÏFine-tuningÛ the American economy is like fine-tuning a football crowd or a speech by Dirksen. If this kind of finesse could combine high employment and price stability some country would have learned the secret by now.</br></br>Before winter returns again, faced with a further increase in prices and a bad commodity balance, Mr. Nixon, one can predict with absolute certainty, will be pleading for wage and prioe restraint. That is to say he will have reinstituted the guideposts without the guidance.