Bureaucrat with a Bang

At a press briefing marking the first anniversary of President Nixon's New Economic Policy, Donald Rumsfeld, the Cost of Living Council director, paid tribute to an unsung hero of wage-price control, a man "who without question has contributed as much to the design and development and establishment of Phase II as any human being" --one Marvin Kosters.

Marvin who? A slight, dark-haired 39-year-old economist, Kosters is a prime example of the almost invisible bureaucrat who exercises great power. His title is Assistant Director for Planning and Analysis of the COLC, which means he is the man with the figures, the individual who analyzes problems for the prominent policymaking chiefs --five Cabinet members sit on the COLC. Kosters is a cool, precise hard worker; he wastes no time exhaustively analyzing dozens of ideas that he does not think will work. Instead he marshals his figures to point toward a single clear course of action. Largely because he knows more about complex economic details than higher-ups do, many Phase II policies reflect his viewpoint.

Kosters sees controls as a kind of collapsible boat, to be used in an emergency, then folded up and put away completely. He received his Ph.D. from the University of Chicago, the bastion of Milton Friedman's extreme free-market economics. And that, Kosters observes dryly, "leaves no one unmarked." He worked for five years for the Rand Corp., later for the Council of Economic Advisers, and then the Labor Department until Nixon started the COLC.

Cost-Push. Kosters joined with the firm conviction that controls should be aimed at "cost-push" inflation--the type that results when wages and prices drive each other up in a rising spiral. He insisted that controls disturb the free market as little as possible. Kosters' first stand was to argue--successfully--for exempting whole categories of prices, including many rents and most secondhand items. "Take used cars," he says. "They are not part of the production process."

On the other hand, Kosters has spotted price trends that seem to call for quick Government action. An obscure price increase in hardwood maple led him to suspect that lumber prices in general were about to jump. On his recommendation, the COLC put under controls small and medium-sized lumber mills, which had been exempted. Kosters claims that in some cases they were buying lumber from big mills at controlled prices and selling it on the open market for much more. Last month Kosters convinced Rumsfeld that requests by automakers for price boosts on 1973 cars should be resisted. He argued that Detroit could make fat profits through increased sales even without price boosts. The Price Commission rejected General Motors' and Ford's increases (TIME, Sept. 11).

On the wage side, at the start of Phase II Kosters felt that many unions were entitled to substantial pay increases in order to catch up with past price inflation. But he urged that the line be drawn against aerospace workers when they won a big pay hike. To Kosters, the boost defied free-market economics: heavy layoffs in aerospace dictated modest increases, but pay was rising sharply because historically it had followed auto-industry wages. If wage inflation cannot be held down in an industry with an oversupply of labor, Kosters argued, it cannot be held down anywhere. The Pay Board shaved the aerospace rise, setting a precedent that has since enabled it to reduce other increases.

Kosters jokes that wage-price controls must be working, and working evenhanded, because "business is complaining that it cannot survive on recession profits and labor says it is being forced to swallow inflation--when the figures show that real wages and profits are both up." The major flaw is that food prices, which are largely uncontrolled, are rising rapidly, undermining consumer confidence in the whole program. Kosters still argues that food prices reflect not cost-push inflation but the pressure of demand upon a limited supply. He is beginning to wonder, however, whether controls may have to be extended to cover "demand-pull" inflation. In pondering such problems, Kosters thinks of himself as a practical man rather than an ideologue; he pledges that any price that is rising sharply will get quick COLC attention.

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