Statement by the President Upon Terminating Price and Wage Controls.

THE GENERAL CONTROL over prices and wages is justifiable only so long as it is an effective instrument against inflation. I am convinced that the time has come when these controls can serve no useful purpose. I am, indeed, convinced that their further continuance would do the nation's economy more harm than good. Accordingly, I have directed the immediate abandonment of all control over wages and salaries and all control over prices except that necessary to implement the rationing and allocation programs of sugar and rice. Rent control, however, must and will be continued.

On October 14, I reported to the people on the subject of the meat shortage and our general stabilization program. In addition to freeing meat from control I directed that the lifting of other controls be accelerated. As a result, controls have been removed from practically all foods and a long list of other commodities.

The Price Administrator has advised me that, with so much of the economy freed from price controls, clinging to the rest would, in his judgment, lead to distortions in production and diversion of goods to an extent far outweighing any benefit that could be achieved.

There is no virtue in control for control's sake. When it becomes apparent that controls are not furthering the purposes of the stabilization laws but would, on the contrary, tend to defeat these purposes, it becomes the duty of the Government to drop the controls.

The major problem with which we have had to contend is the withholding of goods from the market. As price controls are dropped, one by one, many sellers naturally hold on to their goods in the hope that their turn will come next and that they can obtain a higher price. In addition to those who are holding on to goods merely in expectation of decontrol, there are others whose motive is deliberately to force decontrol by depriving consumers of essential goods or manufacturers of essential materials. This withholding is becoming so serious as to threaten key segments of the economy with paralysis.

The real basis of our difficulty is the unworkable price control law which the Congress gave us to administer. The plain truth is that, under this inadequate law, price control has lost the popular support needed to make it work. At best, the administration of price control is an extraordinarily difficult and complex business and it can work successfully only if the people generally give it their support.

We have now reached the point where many of our shortages have disappeared and in many other areas supply is rapidly approaching demand. In the fifteen months since V-J Day the stabilization program has preserved a large measure of general economic stability during a period in which explosive forces would otherwise have produced economic disaster. In fact, the situation is far more favorable for the return to a free economy today than it was when the present badly weakened stabilization law was finally enacted by the Congress.

Nevertheless, some shortages remain and some prices will advance sharply when controls are removed. We have, however, already seen what consumer resistance can do to excessive prices. The consumers of America know that if they refuse to pay exorbitant prices, prices will come down. Wholesalers and retailers alike are aware of the danger of accumulating inventories at prices so high that they cannot be confident of reselling at a profit. Manufacturers, thinking of their future markets, will hesitate to raise prices unreasonably. In short, the law of supply and demand operating in the market place will, from now on, serve the people better than would continued regulation of prices by the Government.

The reasons which impel the lifting of price controls are not applicable to rents. Housing is desperately short and will continue to be short for a long time to come. Tenants are in no position to resist extortionate demands. The fixing of rents by the ordinary processes of bargaining would bring hardship and suffering to our people. It may be that some adjustment of rents will be required, but control of rents and control over evictions must be continued.

I wish that it were possible to keep effective price controls on building materials in furtherance of the Veterans' Emergency Housing Program, under which we have seen an unprecedented acceleration both of homebuilding and of the production of building materials. But price control on building materials alone, with no price control on products competing for the same raw materials, would drive these materials away from housing and defeat the objectives of the program. The removal of price ceilings on building materials will obviously necessitate a change in the approach to some of the problems in the housing program. I am asking the Housing Expediter to report to me promptly in this regard. We must continue an aggressive program of building homes and apartments for veterans.

The removal of price controls leaves no basis or necessity for the continuation of wage controls, which have operated, in most industries, only as an adjunct to price controls. Accordingly, I have issued an Executive Order terminating all wage and salary controls under the Stabilization Act of 1942.¹ This does not affect, of course, the statutory provision governing changes in terms and conditions of employment in plants operated by the Government pursuant to the War Labor Disputes Act.

¹Executive Order 9801 "Removing Wage and Salary Controls Adopted Pursuant to the Stabilization Act of 1948" (3 CFR, 1943-1948 Comp., p. 583).

I have asked the Bureau of the Budget, in consultation with the agencies involved, to prepare plans for the reduction of operations resulting from today's action, and to devise the most effective and economical methods for administering the functions which remain.

The lifting of price controls and wage controls results in the return to a free market with free collective bargaining. Industry has sought removal of price controls while labor has pressed for removal of control of wages. Both have insisted that removal of these controls would lead to increased production and fewer work stoppages.

High production removes the hazard of inflation and brings prices within the reach of the mass market. Wage rates not justified by labor productivity and prices not justified by manufacturers' costs may bring the illusion of prosperity. In the long run, however, good wages, full employment and sound business profits must depend upon management and workers cooperating to produce the maximum volume of goods at the lowest possible price.

Today's action places squarely upon management and labor the responsibility for working out agreements for the adjustment of their differences without interruption of production.