Inflation's Firing Line

In Chicago's giant Stevens Hotel last week gathered 2,000 men who stand on the firing line between U.S. business and inflation. They were members of the National Association of Purchasing Agents, the most price-conscious men in the U.S. Their convention this year was a remarkable get-together between Government's pricers and buyers--Knudsen, Henderson, Nelson, et al.--and those of industry.

On what the purchasing agents thought and felt depended to a large extent whether the U.S. would have inflation or avoid it. If they decided that inflation was coming, and began an all-out spending spree, only drastic Government inventory control could keep the lid on.

There was no question that the delegates did not want inflation and did want to aid the Government in defense. Said President George E. Price Jr. (Goodyear's purchasing agent) in his keynote address: "We are looking not so much at the problems of how we can benefit our individual companies as how we can best serve our nation." But they looked to Government's men at the meeting to tell them how to proceed. Said Price: "We recognize the need for guidance. This is a time of great confusion to us all."

From able Economist A. W. Zelomek of Fairchild Publications, now dollar-a-year man with OPM, the delegates got a good idea of how potentially explosive the price situation was. On a chart he showed that total U.S. production had risen sharply last year until about October. Then, as the U.S. neared the limit of present productive capacity, it reached a plateau which can slope upward only slowly in the future. But the amount of production going into armament had increased sharply since October, would increase even more in the future. Henceforth production heretofore taken by civilians would have to be diverted to defense even though civilian purchasing power continued to rise. Concluded Zelomek: "We are now well into the period in which economic factors . . . have become inflationary, for the first time since the war began."

Zelomek believed the Government could halt the inflationary spiral with its present controls (inventory pools, priorities, taxation of consumer incomes, OPACS price ceilings, etc.). Only trouble was that some of the measures (like ceilings on wages and farm prices) were political dynamite. Problem: would the Government have the guts? Burly Leon Henderson told the delegates the Government would. He said that OPACS was ready to crack down on any situation, including wages, that got out of line. (Last week he voiced some opposition to railroad labor's demand for a 30% raise.) Getting down to fundamentals, he even threatened to crack down on the purchasing agents themselves if they got "panicky about inventories and corralling supplies." To the theorv that the OPACS system of handling price situations piecemeal is unpractical he replied: "If I believed that this were so I should be for a rigid ceiling on all prices . . . and I should have been for it early." But his denial that wages or farm prices were as yet moving out of line left delegates unconvinced.

Many a delegate wanted to know: how far would the Government's buying program, interfere with his own? OPM's speakers left them no doubt that business-as-usual was dead for the duration. Director of Purchases Donald M. Nelson set the U.S. goal at $35,000,000,000* of defense production a year, which meant a corresponding decrease in civilian production. The purchasing agents were urged to adapt their buying policies to a long defense pull, to seek substitutes for strategic materials, not to hog inventories, so that no manufacturer should be short of materials while another's warehouse bulged.

But the defense program still has no central economic authority charged with gearing U.S. production to the armament effort. Hence many a specific question in the agents' minds went unanswered. Already their buying policies have changed from a pre-war hand-to-mouth basis to forward buying for nine months hence or more. Chief danger, in a situation where only a spark might set off an inflationary explosion, was that industry might never be told the answers, would have to buy everything in sight to protect itself.

Said one agent after the meeting was over: "You ask questions and where are the answers? Until somebody can tell a fellow who has an A-1-a priorities order how he can get delivery of materials in less than nine months, a lot of these fellows are going home and do what they've been doing right along--buy as much as they can."

* This week OPM Statistician Stacy May set it at $40,000,000,000.

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