Show Inflation Inflation Shadow Boxing By George Gcorge Vice President resIlient anti anil Chief 1 Economist National Association of 01 Manufacturers After a long debate Congress Con Can gross gress has ha extended for two years the life lire of the Council on Wage and Price Stability In addition to its previous powers the council will now be authorized to require private private vate parties under subpoena to submit relevant information including data classified by byproduct byproduct byproduct product lines In March the majority whip Congressman McFall Introduced legislation that would in effect have restored mandatory price controls on so-called so concentrated indus indus- tries This never got ofT off the ground More serious were the issues that arose in connection with legislation to extend the life of the Council on Wage and Price Stability beyond its then-scheduled then expiration date of Aug 15 IS 1975 As was in inevitable inevitable In in- evitable this was regarded as asan asan asan an opportunity to give new duties to the council that would have moved it in the direction of a mandatory wage-price wage control board Thus Thu one proposed pro pro- posed amendment would have required that the council be he notified 30 days in advance of any price increase by hy a corporation corporation corpo corpo- ration above a certain size Another proposal would have empowered the council to impose im ml- pose poe a day 60 delay on on any planned price increase None o of these thee extreme proposals proposals pro pro- survived the he legislative process In the end the only substantial addition to the councils council's powers was the right to subpoena product-line product data The life of the council is extended for two years instead in instead instead in- in stead of the one year car originally considered This Thi i is on the whole an advantage since it i is unde undesirable that the same i is sues be debated all over again in the political atmosphere of an election year What is distressing is b the preservation in this form of the illusion that direct government government govern govern- government ment whether intervention intervention whether by monitoring jawboning or mandatory regulation regulation can can serve some useful purpose against inflation The activities of a n body like the Council on Wage and Price Stability can only be a form of shadow boxing against inna tion lion The council can strike at specific wage and price changes the the shadows cast on the wall by inflation It can do nothing to change the underlying economic economic eco eco- conditions from which inflation gains it its strength The notion that the thc market power of producers in concentrated concentrated concen concen- industries is an all originating ing cause of inflation has been heen r thoroughly discredited by a number of careful academic studies What happens is that prices in these industries react more slowly to demand inflation inflation Inna- Inna tion than prices price in other sectors sectors sectors sec sec- tors and they arc are still catching up tip after demand pressures have begun to subside The councils council's shadow boxing can become a fascinating and exciting public spectacle especially espe if demand inflation re re- re vives Much will depend on the discretion of the council If in the hope of winning the crowds crowd's applause it swings widely a lot of innocent bystanders by hy- standers slanders will be hurt But nut if th the council holds hack back the crowd might insist that a new and stronger agency he be sent in to carry on the battle hattle and punch lia harder der Meanwhile inflation in inflation in- in nation will he unaffected since only it its shadow i is being struck |