What the United States needs right now, I submit, is a sturdy buyers' strike. Every element but one is in place now for a long period of economic stability.
Not since Franklin Delano Roosevelt was first elected has there been such successful and widespread resistance to higher wages. As a result wages are remarkably steady. Wholesale prices are steady. There is no excuse for rising prices. But every time I go into a store, or a theater, or a restaurant, I am startled, and pained, by the continued upward climb in retail prices, although that rise is modest compared to the high inflation rates of the late 1970s and early 1980s.
Retail prices continue to climb, but not because the rise can be justified by either higher wages or higher wholesale prices. The only possible explanation is that the public allows it to happen. And by happening right now, within the months directly ahead, this retail price climb can wreck the best chance we Americans have enjoyed in a long time to get back to the economic stability we enjoyed when Dwight D. Eisenhower and John F. Kennedy were Presidents of the US.
Back in those days the annual rise in the consumer price index was sometimes as low as 1.2 percent. That was getting about as close to zero inflation as any modern economy can achieve. Right now, most economists are jubilant over the fact that the US gross national product is going up at a 6 percent rate while retail prices are only going up by about 4 percent.
It's all good news, as far as it goes. We have recovery, rising productivity, rising employment, and only 4 percent retail inflation.
But can it last?
The same economists who are jubilant and surprised over today's good news are also worried about the longer-term prospects. The news, they say, is either too good to be true or too good to last. There are already signs of an inflationary revival. Prices do keep on creeping upward, without the excuse of rising wages.
Automobile prices are a case in point. Only the other day the manufacturers and dealers were offering cut-price deals in the form of cash refunds. That is finished. Now they expect to be paid the full list price, and they boost that each year.
Supposing consumers got together and agreed among themselves that another round of price rises would be one too many and simply refused to pay more this month than they paid last. What would happen then?
Resistance to higher prices on the part of consumers would provide an essential ingredient that is still missing in the economic mix. Employers would in turn have to hold their own lines against their employees and their suppliers. But they know how to do that. They have been doing it. They would simply have to go along with slightly narrower profit margins.
The truly amazing thing about the present economic recovery has been the stability of wages. It dates from the time President Reagan resisted the airline traffic-controller strike. The most surprised people in America were the leaders of the union. It obviously never occurred to them that the US government would actually hold out against a strike, even though the strike itself was illegal.
Nothing has been quite the same since. The old assumption was that every wage earner was entitled to an annual improvement in his standard of living regardless of whether his productivity had gone up. The assumption had been constant since Roosevelt's New Deal. It produced the wage spiral, which fed into the overall inflation spiral. That old assumption has been broken.
Company after company is doing what Continental Airlines and Greyhound are doing. Either they file for bankruptcy and escape by that route from wage contracts that had wrecked their competitiveness, or they simply close down, as Greyhound has done, and start rehiring.
Deregulation plus enforcement of the law against the air traffic controllers has made organized labor recognize that times have changed. In many a case, like Chrysler, the union itself recognized that it must take a reduced return on labor if the company is to survive in a competitive environment. The wage spiral has been broken.
But all of this can be lost and go for nothing if prices are allowed to go on creeping upward. If they do, they will drag wages up again and we will all be back where we started when the air traffic controllers union was broken.
A buyers' strike could stop it. But I suppose that is just a pipe dream.