Inflation in the Raw

The people at the Stop & Shop supermarket chain felt that an explanation was necessary. So at each of their 158 stores in the Northeast, managers posted a sign:

IN SPITE OF ALL WE'RE DOING TO KEEP FOOD PRICES DOWN, CERTAIN PRICE INCREASES YOU SEE IN FOOD STORES ARE INEVITABLE. IT'S SIMPLY IMPOSSIBLE FOR FOOD STORES TO ABSORB REPEATED WHOLESALE COST INCREASES FROM THE MANUFACTURERS WITHOUT REFLECTING SOME PART OF THESE INCREASES IN RETAIL PRICES.

Those discouraging words stand to acquire even more validity in the months ahead. Bureau of Labor Statistics figures for wholesale food prices, which eventually show up at store check-out counters, were up 7.6% in September over the same month last year. The news was worse concerning a bunch of unprocessed comestibles that the BLS calls "farm products," including fruits, vegetables, grains, poultry and livestock: up 16.4% over last year.

The rises for those raw agricultural products, on which there are no price controls down on the farm, contrast sharply with the increases for strictly controlled items. At the wholesale level, metals were up 2.4%, furniture 1.6% and chemicals one-tenth of 1%. Consumers now have to spend relatively more for food than for hard goods, so price controls have had the subtle effect of benefiting the agricultural sector of the economy at the expense of the industrial sector. Such disparities have led some disenchanted eaters, like AFL-CIO President George Meany, to think harder and speak up louder about putting controls on raw agricultural prices. Meany is irked that wage increases in the last year have been held well within the Administration's 5.5% guideline, while food prices have grown as high as an elephant's eye. Says he: "They're still playing around with this idea that they can just control wages, but have no food controls because the President has said food controls would require a big bureaucracy." It certainly would; Meany suggests that the Government engage 100,000 paid enforcers, if necessary, to police all price ceilings.

The Administration has another reason for keeping hands off farm product prices, and Marina von Neumann Whitman, a member of the President's Council of Economic Advisers, is becoming the chief public defender of the policy. "If you prevent the market from attempting to fulfill supply and demand," she said recently, "then something is going to have to happen, like rationing." Food controls could keep prices so low that farmers would have little incentive to expand production to meet demand, so controls could lead to shortages and black markets. The words may sound convincing to housewives who remember World War II ration books, but in a month or two, when September wholesale food prices are translated into retail prices, the chances of severe shortages may seem more worth the risk of controls.

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