Price Control in Wartime

Report Outline
Current Efforts to Check Price Advance
Price Control During the World War
Proposed Plans for Wartime Price Control

Current Efforts to Check Price Advance

With the national defense program passing from the stage of planning to the stage of production, government officials have shown growing concern over possible effects of the program on price levels. Sharp increases in the prices of a few commodities—lumber, nonferrous metals, woollen goods, wood pulp—have been interpreted in many quarters as foreshadowing a general rise in prices and living costs. The National Defense Advisory Commission has already attempted, through the use of various extralegal methods, to restrain upward price movements, and more formal methods of price control are now under study at Washington.

The defense program has thus far had little effect on the general price level, although abnormal demands incident to the program have caused increases in the prices of a few basic commodities. The wholesale price index of the Bureau of Labor Statistics shows that prices rose sharply immediately after the outbreak of the European war in September, 1939, but soon levelled off and have since remained steady. Standing at 75.0 in August, 1939, the wholesale price index (1926 equals 100) jumped to 79.1 in September and to 79.4 in October, 1939. It remained at about that level until February, 1940, when it declined to 78.7. The decline continued through August, 1940, when the index stood at 77.4. The average for September was 78.0.

Defense Commission's Reliance on Voluntary Control

In its attempts to check actual or threatened price advances, the Defense Commission has so far depended chiefly on the voluntary cooperation of industry. Late in July, for example, members of the Commission conferred with leading producers in the paper and pulp industry regarding prices and supplies. Leon Henderson, in charge of the Commission's Price Stabilization Division, announced, July 30, that “Our recent survey of prices indicated that paper and pulp offered a dangerous possibility of developing an inflationary spiral. It now appears that for the time being at least this threat has been removed…Individual members of the industry whose unit production is substantial have assured us that they are firmly opposed to permitting an inflationary situation to develop. They offered full cooperation through their individual price policies to prevent such a development.” Similar conferences were held with producers and industrial consumers of scrap iron and steel early in October.