Minnesota’s Economic News — W/E 9/24/21
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Henry Hazlitt (1894-1993) was one of the 20th century’s greatest writers on economics. His 1946 classic Economics In One Lesson is still an excellent introduction to the subject for the general reader. And, for a number of years, he was columnist in Newsweek, bringing economic insights to the issues of the day and expressing them with clarity. The article below is a classic example of this. It appeared in Newsweek on this day in 1946.
President Truman took exactly the right action on meat after giving all the wrong reasons for it. His arguments on the radio were necessarily inconsistent because he was attempting to do an inconsistent thing—to make the voters angry at the Republicans for trying to do in July what he himself was at last being forced to do in October.
It was the President’s veto that brought about the summer price-control holiday he was deploring. This holiday was in fact salutary. For the first time in years it gave the American public a glimpse of the free market. In spite of the manipulation of index numbers by government agencies, the public knew that it was buying meat below the black-market prices that most buyers had previously been forced to pay. And the public was really getting meat.
Mr. Truman and his advisers now say, in fact, that it was then getting too much meat and that this is the real reason for the subsequent shortage. The figures do not support this contention. For a short six weeks meat production was up an average of only 30 percent above the corresponding period of the preceding year. But the stockmen who did rush unfattened and unfinished cattle to slaughter did so, not primarily because there was then a free market, but because they correctly feared an early reimposition of controls. The President himself conceded the truth of this when he wisely refused to declare another price-control holiday and announced instead that meat controls would be permanently lifted.
But Mr. Truman’s final wise act threw a sad light backwards on the price-control record of his Administration. He and his assistants had roundly denounced the Senate when it twice voted for termination of controls on meat. The Price Decontrol Board, had it acted with common sense and adhered strictly to the requirements of the law, would not have put meat back under control on Aug. 20. The Secretary of Agriculture had a chance to decontrol meat on Sept. 1 merely by failing to list it as “in short supply.” Production of meat was in fact then running above the prewar rate. He had a second opportunity on Oct. 1, but consistency with his September ruling forced him to pass it by.
When the Democratic Majority Leader of the House then called in alarm for a 60-day suspension of price controls on meat, the President flatly rejected the idea. Instead, Price Administrator Porter rushed to inform the country that “stabilization” was more important than steaks—in other words, that it was more important that the OPA should continue to fix ceiling prices on meat than that there should be any meat to buy. And then Mr. Truman acknowledged that, after all, it was price control that had been bringing about the shortage; and he lifted it.
A few weeks must elapse before meat on the hoof can become meat on the dinner table. Empty trade “pipelines” must be filled up; meat in storage on Oct. 1 was the lowest in 30 years. As a result of this unprecedented shortage brought about by price control, meat prices temporarily soared, but began to decline in a few days and should be back in a few months to reasonable levels.
One of the most encouraging aspects of the President’s radio talk was his clear recognition that “the lifting of controls on meat . . . cannot be treated as an isolated transaction”; that we must “speed up the removal of price controls” and wage controls, and move “toward a free economy.” It remains to be seen how seriously these words will be taken and how quickly put into effect. At the moment of writing this our whole price-control system is a mass of fantastic contradictions. The price of whisky (except in new barrels) is controlled, but the price of milk is not. Lamb prices go where the market sends them; but automobiles are held down by government edict so that the poor can buy their share of Lincolns and Cadillacs.
How can this economic nightmare be brought to an end? The way to decontrol is to decontrol. The mere announcement of speedy decontrol makes it necessary, for it tempts middlemen to hold goods off the market until prices are free. Not only should decontrol proceed as rapidly as the present messy law allows, but the President should call Congress in special session immediately after election to repeal remaining price controls on everything except rent, and to turn rent control over to the states.