Choose Your Own Word

Like everyone else, Congress' Joint Committee on the Economic Report wanted to know what was happening to the U.S. economy. Did rising unemployment and falling commodity prices mean a recession? Or would it be just a temporary letdown? Last week the committee called in economists, unionists, farm leaders and businessmen to find out. Among them was Economist A.D.H. Kaplan of the Brookings Institution, who had an economic explanation that everyone could understand.

The U.S., said he, was like a baby who had been taking the bottle too fast; it had to have a chance to burp. The big question was: "Is it going to be just one little burp, or is it going to be a chronic hiccup which is going to kill baby?"

Economist Kaplan thought it was going to be just a little burp. So did General Electric Co.'s Chairman Philip D. Reed, who thought that the danger from inflation was past, and that the economy is undergoing a "healthy readjustment." President Truman's demand for price and wage controls, said Reed, "just cannot and should not be considered at this delicate period of readjustment.* [It would] give our Government a great deal more power than the Labor government in England has even asked for." (At the White House, President Truman said that even though some prices were leveling off, he still felt that he should have those stand-by price and wage controls--and that $4 billion in new taxes.)

New Experience? None of the "healthy readjustment" talk sat very well with the C.I.O.'s Secretary-Treasurer James B. Carey or some of the farm leaders who appeared before the committee. They thought that there was still danger of inflation, and that the President should get what he asked for. So did John D. Clark of the Council of Economic Advisers, who said: "If this inflationary boom levels off by itself, it will be a new experience."

While the committee tried to make up its mind, Commissioner Ewan Clague of the Bureau of Labor Statistics took a hard look at unemployment, which is now estimated at three million. He thought that the problem would not require federal action (e.g., public works projects) unless the total reached four to five million and was "sustained for some time." But he saw no sign of that now. The importance of the more-than-seasonal January slump, he said, cannot be gauged until the seasonal pickup in the spring. (The boom still had a good head of steam. Heavy construction awards for the first seven weeks of 1949 topped $1 billion, up 53% from 1948.)

New Definition. At week's end, white-haired Dr. Edwin G. Nourse, chairman of the Council of Economic Advisers, dug up a word for what was going on. The gaunt old (65) ex-professor, who had spent 23 years with the Brookings Institution, has long been a middle-of-the-road economist who sometimes seems to be trimming his square-rigged economic sails to the Administration's wind. He neatly dodged predicting either inflation or deflation. What the country was going through, he said, was "disinflation" (a five-dollar word for burp). It was quite a different thing from deflation, he explained. Deflation means a collapse in the price structure, but "disinflation" merely takes the upward pressure off prices.* Everything would be all right, he said, if the public would avoid the jitters "over the healthy" decline in prices going on.

*General Electric also thought that the economy could adjust better without a fourth round of wage boosts. Last week it turned down the C.I.O.'s demand for a shorter work week, liberalized pensions.

*When Geoffrey Crowther, editor of London's Economist, first coined the word (in LIFE last June 7), he gave it a different meaning: a state of the economy in which there is "more of a decline in prices than in wages."

This file is automatically generated by a robot program, so reader's discretion is required.