Governing by Guideline

Government control of business can be mentioned only in whispers in Washington, and the slightest hint that the Administration might be considering such a policy has drawn pained denials. One of the President's top advisers last week dismissed as "silly" the idea that the aluminum-price rollback amounted to control. "Nobody," added White House Aide Joe Califano, "wants controls." Nonetheless, the Federal Government's influence over U.S. business is growing steadily more pervasive and persistent--and effective control of prices, by whatever name it is called, is part of that influence. Last week, as if to prove the point, the copper industry rescinded its recent price hikes just two days after the Government announced that it would sell at least 200,000 tons of copper from its stockpile.

No Autos. The Government's release of stockpiled copper was different from its aluminum dumping. Copper is in short supply, partly because of the increased demands of the Vietnamese war, and the industry actually welcomed the Government's release of the metal as a way to help avert bottlenecks. In fact, the industry had raised prices in response to increases abroad. But Defense Secretary McNamara, announcing the news at one of those evening press conferences that threaten to become habitual, left little doubt as to what he thought about copper's price rise--or anyone else's. "By definition," said McNamara, "a price increase is inflationary." Reacting even faster than the aluminum producers had, Anaconda and Phelps Dodge within 45 hours rolled back their 51% price rise, cut the cost of copper from 380 to 360 per lb.

The Administration has thus served notice on U.S. business that it intends to block price increases by every means at its disposal, using the Viet Nam fighting, when necessary, to invoke restraint. If anyone did not get the message the first time, Treasury Secretary Henry Fowler repeated it in a tough Chicago speech. The Government is determined, he said, to "blow the whistle impartially on labor and business" for any moves "that threaten economic stability and expansion." Businessmen began to speculate what industry would next suffer the leverage of the Government's stockpile, which includes 77 items ranging from asbestos to sperm oil. Said General Motors President James Roche, answering a reporter's question: "We're very happy that the Government doesn't stockpile automobiles."

Sharper Controls. The stockpile maneuvers are, of course, only the most visible examples of Washington's increasing use of guidelines to force restraint on industry. Businessmen have been grumbling about the "voluntary" controls in business spending abroad, and the Foreign Trade Council last week called for their abolition. Almost simultaneously, Treasury Secretary Fowler, Commerce Secretary John Connor and William McChesney Martin Jr., chairman of the Federal Reserve Board, appeared together to announce some bad but expected news: the nation's balance of payments, after running a brief surplus in the second quarter, showed a $485 million deficit during the third quarter. That was 30% larger than the Administration had expected. As a result, the controls on business spending abroad will be sharpened and tightened. The 500 big U.S. corporations involved in the program will be asked next year to meet individual, Government-set ceilings on their dollar outlays for new plants or company acquisitions in foreign countries.

U.S. banks are also under voluntary controls on lending abroad, and have been pressured by the Administration into not raising interest rates at home. Some businessmen fear that the Government may soon impose tighter controls on capital moving abroad, put a head tax on tourist travel, or even require licenses to build plants overseas.

Confronted by soaring demand, rising costs and strained capacity--inflationary factors encouraged by the Administration's expansionist policies--businessmen feel squeezed between the irresistible laws of supply and demand and the immovable determination of Lyndon Johnson to keep a lid on prices. What the Administration seems to be demanding is restraint on a staggering scale, under loose rules and without force of law. Such indirect controls are difficult to administer and impossible to police equally; it remains to be seen how firmly the Administration will handle the next big wage-hike bid. But the message to business is clear: cooperate--or else.

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