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The law provides that no publicity shall be given to the stages of investigation and conciliation. Since no problems handled in the first year went beyond the conciliation stage, the charges and the outcomes of proceedings were not published, except in instances in which the employer himself announced the results. One employer of hundreds of workers, who made changes in his practice after a charge of discrimination, expressed his satisfaction with the results in these words: "Some of the new people I've hired are outstanding. This is a good law. I'm glad I've hired these workers. You ought to point out to employers the benefits they get from an increased labor market when they have access to so many more qualified workers."
The restriction against making public the results of conciliation in specific instances prevented the general public from knowing at once when some large company opened its doors to members of previously excluded minority groups. It was observed, however, that employment patterns in telephone offices, banks, department stores, and insurance companies had been liberalized.
WORKING people and governments throughout the world have been following price movements with close attention, concerned with the effects of rising prices on purchasing power and levels of living. Although the current war against inflation is waged by nations individually, it is, in many respects, an international struggle. Shortages of coal and other raw materials for industrial production and of basic necessities for human consumption are world-wide. The price structures of different countries are linked by reviving international trade, and success or failure in coping with the price problems in one country affects other countries. Because of the long period when manpower and productive facilities were diverted to war purposes, the spending power of consumers almost everywhere is greater than the available supply of consumer goods at current prices. To offset the imbalance between spending power and the supply of goods, most countries have continued wartime rationing and price control with varying degree of effectiveness.
The chief problem of countries outside the battle zones arises from meeting demands for civilian goods which accumulated during the time when production was concentrated on military goods. Obvious causes of pressure on prices in most parts of Europe and many parts of Asia are the destruction of productive facilities and manpower losses. In areas such as Latin America, an important part of the difficulty stems from the increased prices or unavailability of goods that were formerly imported.
In some countries, mainly those that are highly industrialized, either law or the operation of economic forces kept prices from rising more than 30 to 60 percent between the start of the war in 1939 and the end of 1946. Among these nations which came out of the war period with their productive capacities relatively unimpaired or even improved are the United States, England, Canada, Australia, New Zealand, Sweden, and Switzerland. In less industrialized areas and even in certain industrial countries, prices have risen to many times the prewar level. In Belgium, for example, the restoration of prewar production levels has proceeded more rapidly than in most other parts of the war area; nevertheless prices are about three times the prewar level. In China and many Latin American countries, which were never highly industrialized, the bulwarks against inflation were weak or nonexistent.
The inflation problem, as it existed at home and abroad at the end of 1946, is summarized in the present article. Examples are given of the various types of situations which prevail in different groups of countries.
1 Prepared by Irving B. Kravis with the assistance of other members of the Staff on Foreign Labor Con ditions, under the direction of Faith M. Williams.
Economic Forces Behind Price Movements
COUNTRIES WITH RELATIVELY LIMITED PRICE INCREASES
One of the striking features of the price problem in the United States is that the difficulties are not attributable to a general decline in the supply of consumer goods. On the contrary, the over-all supply of consumer goods has, if anything, expanded rather than contracted since 1939. It is true that most durable goods were not available during the war years, but such products accounted for only about 10 percent of 1939 consumers' expenditures. The total value of consumer goods and services in the United States rose from 61.7 billion dollars in 1939 to 106.4 billions in 1945, and it is obvious that all of the increase was not the result of rising prices.
The inflationary pressures in the United States appear to be caused chiefly by higher money incomes; national income rose from 70.8 billion dollars in 1939 to 161.0 billions in 1945. During the war period, deficit financing contributed to the increase of money incomes; after hostilities ended, there was a drastic decline in Government expenditures while taxation was held at wartime levels. The solution of the price problem depends primarily upon the increased production and marketing of goods to match high incomes.
The United States economy is subject to pressures from other countries in the form of higher prices for such important imports as tin, copper, lead, zinc, coffee, cocoa, and sugar. In general, however, the United States price level is less sensitive to foreign price movements than are the price levels of countries more dependent on foreign trade.
On the other hand, rising prices for United States exports of industrial equipment and consumer goods affect countries dependent upon the United States for these goods. The elimination of most price controls in November 1946, for example, caused sharp repercussions throughout the world.
Canada is the country most closely connected with the United States in an economic sense and has probably been affected most directly by developments in the States. Shortages in the United States of materials and parts, upon which Canadian industrial production depends to a great degree, has been an important factor retarding the increase in the level of civilian production in Canada. According to the Canadian Minister of Finance "perhaps the greatest threat to the stability of prices in Canada comes from the rise in prices in the United States and to a lesser extent in other countries."
The Minister also recognized that Canada is facing production problems and difficulties with excess purchasing power. The revaluation of the Canadian dollar in July 1946 offset somewhat the effects
of rising prices of United States imports. Canada, as a member of the British Commonwealth, has contributed-in relation to her resources more directly to easing the world-wide shortage of basic necessities; rationing of meat, for example, was reinstituted in September 1945 so that meat could be shipped abroad. However, the quantity of consumer goods available in Canada expanded during the war years; according to an estimate of the Wartime Prices and Trade. Board, the level of consumption was more than 20 percent higher in 1945 than in 1939. Even so, money in the hands of consumers was greater than the value of the goods available.
The English experience contrasts with that of the United States and Canada. As in the North American countries, total private income before taxes rose sharply during wartime. Nevertheless, consumers' expenditures in terms of 1938 prices dropped from 3.6 billion pounds in 1939 to 3.1 billions in 1945. Production for the home civilian market was increased sharply after the war ended, but it was restricted in favor of greater production for export. This was necessary because foreign credits were required to finance imports of food and of raw materials essential to the reconversion of British industry. It is estimated that civilian consumption of clothing, furniture, and housefurnishings in the summer of 1946 was still less than two-thirds of 1935 levels. As a result, many articles of clothing, furniture, and food remained on the rationed list in Britain more than a year after the end of the war. Prices of essential commodities have, in general, been kept under control successfully. The rise in prices, particularly for foods, has been checked through the extensive use of subsidies and control over supply.
Sweden successfully maintained a wartime stabilization program, but was confronted with intensified inflationary pressures after hostilities ended. Foreign demand for Swedish products stimulated an expansion in investment and further diverted the use of Sweden's limited resources of raw materials and labor from consumer-goods production. High prices abroad encouraged exports and made it difficult for Sweden to import without raising domestic prices. The upward revaluation of the Swedish krona in July 1946 by 17 percent cheapened imports somewhat. Extension of large credits to England and Russia paved the way for heavy exports that will not be balanced by immediate imports. The shortage of labor is indicated by the fact that in June 1946 there were on the average only 79 applications for each 100 vacancies as compared to 103 for 100 vacancies in June 1945. All these factors brought the wage-price issue to the fore once more. The December 1946 master wage agreement between workers' and employers' associations, affecting about a million workers, ended the wage-cost-of-living tie in the old agreement, and granted a 5
percent wage increase as of May 1947. Meanwhile, the Government completed plans to subsidize imports, chiefly textiles and shoes, to offset foreign price increases.
COUNTRIES WITH LARGER degrees OF INFLATION
In the countries that have been less successful in combating inflation, reasons for lack of success have varied. In several, the destruction caused by war has made the restoration of productive capacity a slow process. Others, normally dependent upon foreign sources for essential consumer goods, found difficulty in purchasing food and other essentials abroad, and such supplies as were available were high priced. Former enemy countries were faced, in some cases, with relatively heavy drains on current output in the form of occupation costs and reparations payments. Another factor which was important in certain areas was the break-down in transportation systems. Finally, the fiscal policy of certain governments has been an important source of inflationary pressure.
Although official food prices in Belgium early in 1946 were several times the prewar level, the Belgians had maintained a degree of stability in late 1946 which is outstanding for a country ravaged by war. This resulted in no small measure from the drastic program of monetary contraction planned while the Belgian Government was still in exile. In October 1944, 60 percent of all bank deposits were blocked and subsequently were liquidated by means of a 3-percent currency stabilization loan. After the war's end Belgian exports rose steadily and despite shortage of men and materials Belgium was planning for a larger volume of foreign trade. In exchange for an agreement by trade-unions not to press for wage increases beyond the September 1945 level, the Belgian Government undertook in May 1946 to roll retail prices back 10 percent. A wave of strikes followed and brought about another crisis at the beginning of July which was resolved by another understanding between labor and Government. The general principles of a wage freeze and price reduction were retained, but before the end of 1946 prices had risen to the levels prevailing before the price reduction began, minimum hourly wage rates had been increased, and wage readjustments had been applied in several instances.
Conditions in France began to improve almost from the very moment of liberation. By the third quarter of 1946, the rate of output of coal and electric power reached or surpassed prewar levels, and general industrial activity had risen to 80 percent of prewar. The 1946 food crop was good, but, as in many other countries, supplies were held back by producers in anticipation of higher prices. France has, moreover, been confronted with a wage-price problem of the first
* See Monthly Labor Review, July 1946 (p. 30).