Twitch

Certain familiar signs were noticeable again last week. Was the U.S. economy on the verge of another fit?

Over the steel industry hung the threat of a strike. Similar threats hung over the auto industry, the telephone system, the railroads. They were only twitchings, but not to be disregarded on that account. Another industrial convulsion such as shook the country in 1945-1946 would not only wreck the nation's prestige when prestige was so important in world politics, it might shake the whole rickety world right down to its boots.

The Pressure of Prices. The pressure which might provoke the fit was continuing high prices. Labor had behaved with laudable restraint. With the exception of the always exceptionable coal miners, there had not been a major new strike in six months.* But labor could not sit still forever. Labor figured that if prices stayed up any longer, wages would have to go up. And if another spiral plunged the nation into a bust, then industry would have to answer for it. To a large degree, labor was right.

For industry, 1946 had been the Year of Fat. Earnings were up 37% over 1945. Earnings in meat, lumber, cotton goods, shoes and leather goods were sometimes fabulous, while prices in those products soared almost out of sight.

Industry argued that it had to make a profit when it could; fat years make up for the lean. But Secretary of Commerce W. Averell Harriman and his advisers pointed out the situation in which industry now found itself. They earnestly suggested that industry cut prices before it was too late. Too late would be that moment when buyers had been priced out of the market and prices broke and collapsed. It was a question of easing the pressure now or spinning head on into another depression.

Decision for Steel. At this critical juncture, U.S. Steel, bellwether of U.S. industry, began negotiations with C.I.O. steelworkers over a new wage contract. Big Steel could show both industry & labor a way out by following Secretary Harriman's advice.

Henry Ford II had already made a trifling cut in prices. The International Harvester Co. (farm machinery) had made a cut. Big Steel's subsidiary, Carnegie Illinois, made a cut in "extras" (plates and bars of special thickness, etc.). These cuts were duly noted but they were hardly electrifying. A general price reduction by U.S. Steel would be a lightning bolt to clear the air.

Actually, steel is one of the least vulnerable to the charge that its prices have been abnormally high. Steel prices are up, but they are at their proper level in the whole price structure. But Big Steel's defensible position would enhance the psychological effect of its price cut that much more.

Two Men & a Gun. U.S. Steel President Benjamin Fairless considered the problem. He was, quite understandably, unwilling to reduce prices until he knew what he would have to pay under a new wage contract. Wages are 40% of steel production costs. Would Phil Murray, president of the steelworkers' union, withdraw his wage demands if Fairless announced a price cut? Murray, afraid of weakening his bargaining position, would not commit himself. He has simply made it clear that he thinks Steel can raise wages, an argument given substance by U.S. Steel's 1946 net profit: $88.7 million. Murray and Fairless were like two men, who, distrusting each other, frantically held onto the same gun. Neither dared to be the first to let go.

The situation called for statesmanship. Washington conscientiously refrained from proposing to Fairless what he should do. A highly nervous country could only hope that Fairless would consider the problem both as it applied to Big Steel and to the whole U.S.--before the twitching became a fit.

* This week one very old one was settled (see Labor), and another, in the rubber industry, was avoided when a compromise wage boost was granted.

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