Tonight, from Boston, the Advocates: Howard Miller, William Rusher; and the moderator
Good evening and welcome to THE ADVOCATES. Every week at this time THE ADVOCATES looks at
an important public problem and for you, a very practical choice. Tonight our concern is with inflation. And
specifically our question is this: "Should the Federal government adopt long-term wage and price controls for
selected unions and industries?" Advocate Miller says, "Yes."
The dollar you earned in 1967 is now worth 73 cents. And the Administration's answer to
that has been to put large numbers of people out of work. We don't even have to know the statistics: That
unemployment has almost doubled in 18 months; the rate of inflation, the inflation continues at above five
percent; to know that this economy is in serious trouble. Every time we go to a supermarket or a department store;
every time a pay check is less because there is no overtime; every time a member of the family or a friend is laid
off and cannot get another job; we know about the economy. The reason is clear. The wage-price spiral at the very
center of our industrial system, causes widespread inflation. Large corporations and large unions bargain
together. Wages go up prices go up; and all is passed on to the consumer. In the process everyone suffers. The
worker who chases will-o'-the-wisp wages which are eaten out of his pay check by inflation before he even gets his
pay check; businesses that raise prices but watch profits turn to loss; and perhaps most damagingly of all, those
on a fixed income who don't have the power to play whatever game it is the Administration is playing with its game
plan. The answer is clear. An immediate freeze for six months on all wages and prices, and long-term restraints on
selected industries that cause the wage-price spiral. With me to advocate that plan are: Economist John Kenneth
Galbraith; and Congressman Henry Reuss of Wisconsin.
Advocate Bill Rusher says, "No."
One of the oldest fallacies in mankind's repertoire is that a nation can follow unsound
economic practices and then escape the consequences by passing a law against them. That is what Mr. Miller and his
witnesses are proposing to do tonight. And, of course, it won't work. Inflation is caused by a too-rapid increase
in the supply of money -- an increase usually brought on by government, usually in order to cover its deficits.
The cure -- the only cure -- is to reduce the deficits and then bring the money supply into a decent balance with
the actual wealth of the nation. That is what the Nixon Administration is trying to do, and while nothing can make
the cure painless, we are already well on the road to success, and to a truer prosperity for every American. The
Miller-Galbraith proposal amounts to nothing more than an effort to cure a fever by rigging the thermometer, and
with me tonight to oppose it are the distinguished Professor of Economics of the University of Chicago, Professor
Milton Friedman, and the Editor of the National Review, Mr. William P. Buckley, Jr.
Thank you both, gentlemen. Well we hope that you at home will listen carefully. This is a
difficult subject, but it's a vital one for you, and for your pocketbook.
(FILM) Economists agree that inflation is normally caused by excessive demand or spending
in the economy -- that is, when the demand for goods exceeds the ready supply. The result is inflated prices for
the available goods. Higher prices in turn bring workers' demands for higher wages, and the satisfaction of those
demands may lead to even higher prices for the goods those workers produce. And so, we get an upward spiral in
wages and prices. When President Nixon took office, he sought to reduce inflation by traditional measures: by
cutting Federal spending and by tightening credit. This did reduce the amount of money in circulation, and that
lessened demand, slowing economic growth. That has resulted in the highest unemployment rate in nine years; but
the coat of living figures have continued to go up. Against this background of a five to six percent annual
inflation, a variety of corrective measures have been proposed. Some have called for the establishment of
voluntary guidelines for wage and price increases, and for "jaw-boning" -- the use of Presidential power to force
business and labor to stay within the wage and price increase guideposts. Some have urged the President to use the
powers given him by Congress to order a temporary wage and price freeze. Tonight we consider a proposal of
economist John Kenneth Galbraith that goes beyond any of these other suggestions: The adoption of long-term wage
and price controls for selected unions and industries.
Mr. Miller, let's go to the cases; will you begin.
The only thing that has remained stable in this economy has been the continued broken
promises and false predictions of this administration. In June of 1969, a year and a half ago, President Nixon
said: "If our projection proves to be wrong, then we will have to look to other courses of action, because we
cannot allow prices to continue to go up." It is time now for the prophet to act. Inflation has continued to go
up. The line on this chart, representing the rise in inflation, is a line that is scooping money out of the
pockets of every American. And yet, as the inflation is continued, incredibly unemployment has also gone up,
almost double what it was 18 months ago. That's only a statistic; but that's two million people, and their
families, who are being hurt by this economy. The reason? The wage-price spiral at the center of our economy; a
spiral which, once it begins, simply destroys everything in its path. In industry after industry, in steel and
automobiles, and oil, fewer than four firms control 50 percent of the market, or more. And they have the power to
set or administer prices. What those firms do is bargain with equally large and powerful unions. Wages go up.
Prices go up. Because both the unions and the corporations know they can be passed on to the consumer. How
economists call that "oligopoly" or "market power;" but what it is is the power to damage the consumer, and the
entire American economy. The remedy is to go right to the heart of the problem; to immediately impose wage and
price controls across the board for a six-month period -- for the President to do so, as he now has the authority
to do so -- and then to call in the representatives of business and labor, to got agreements on, on wages and
prices that will be within productivity gains. That is, real increases -- not inflationary increases. And if there
is no agreement, to impose the mandatory long-term controls on those industries at the center of the economy, that
cause the problem. Now that plan has several virtues that many economists discount. It is real; it is simple; it
is direct; and, it will work. A leading advocate of that plan is here tonight. John Kenneth Galbraith.
Mr. Ambassador, welcome to THE ADVOCATES.
John Kenneth Galbraith is now Paul Warburg Professor of Economics at Harvard University.
Among his other government posts, he was Price Administrator in World War II, and has been Ambassador to India.
Among his books included The New Industrial State, the most incisive analysis of our modern American economy.
Professor Galbraith, what is the prediction? Will inflation continue?
Well, we've had several years of it; and two years when there's been worsening
unemployment; and no improvement in the inflationary situation; inflation is, has this last year been at the rate
of what. 5.8 percent a year, no better than it was the year before; this is after two years of promises by the
Nixon Administration. So, the only thing one can assume for the future is that it will be like the recent past.
Why does it continue--
--anybody, anybody who will believe that it will get better will believe anything.
Why does it continue to -- why will it get worse, and despite all the standard remedies
that are being applied?
Well, I thought you were very eloquent in your introduction. We have strong unions, which
are capable of going out for large wage increases; and strong corporations which are capable of compensating for
them in price increases. We're faced with -- we'll have a good deal of theory here tonight, but we are faced
unfortunately with a condition. A condition of power in both labor markets and in the market served by the large
corporations. And as long as that continues, we will either have inflation or unemployment or a combination of the
What is the remedy? What should be done?
Well, the remedy is to use the powers that now exist; fix -- freeze prices for six months;
that will break the inflationary psychology, break the structure of inflationary expectations. During that six
months, of course, there'll be great inequalities that will have to be worked out as between unions; and during
that six months, one must work out a permanent arrangement with the strong corporations and the strong unions --
which, incidentally, are not free market instruments. They fix their -- we're fixing prices that are already
fixed, which is a very important point for the other side of this debate.
And, get a system with which we can live more or loss indefinitely.
In reality, will this help management and labor, or will it hurt them?
Well, the unions, this arrangement -- the present arrangement is not good. You got these
big wage settlements; and then they all disappear in cost of living increases; you have the unpredictability and
uncertainty and unpopularity, from the point of view of the business firms, that is associated with constantly
increasing prices. So I don't think it's at all surprising that increasingly the trade unions, and increasingly
the businessmen, have been coming around to this very sensible notion.
But is any kind of wage-price control scheme really feasible. Can it be administered; can
Bear in mind that we have a very concentrated economy; that's the problem. We're fixing,
as I said before, prices that are already fixed. The problem is dealing with perhaps 2,000 large firms that have
-- that produce about half the gross national product; a few hundred unions; it will not take a massive
organization. It's not an administratively simple thing; but there's, there are few things in this world, Mr.
Miller, that are simple. There's no reason to suppose that we've reached the end of the road in economics; there's
still work to be done.
All right; Professor Galbraith, we'll now hear from Mr. Rusher on cross-examination.
Mr. Galbraith, just to clear one preliminary point first, aren't we really talking mostly
about wage controls? I realize that price controls go with them, but we are not arguing, are you, that there have
been exorbitant profits in recent years, particularly in the so-called concentrated industries.
I wasn't arguing that there were exorbitant profits at all, but I have been -- arguing
that there are extremely serious price increases--
Pressures. Pressures which come from the wage increases extorted by the large
I am avoiding any effort, Mr. Rusher, to put the blame either on labor or on
You are, precisely, avoiding it.
worth, worth -- Yes. And this is the correct thing to do. And I'm glad to be helpful to
you on this point. --
It is certainly the adept thing to do.
It is very important that one not turn this into an assessment of blame. One--
We must certainly avoid putting the blame where it belongs.
One must not put blame on either side, Mr. Rusher. I realize ideologically your interest
in this matter, but--
We will call it--
We will call it a--
But I want to be helpful to you.
We'll call it, a we'll call it wage and price controls, but we're really talking
Right. How tell me, suppose -- suppose--
That's -- that's your formulation, not mine--
--yes, it is, it's my formulation of your proposition. Correct. Now suppose your controls
on wages and prices were 100 percent effective, which is quite a supposition, and suppose that Detroit, the car
capital, did not want to produce at the controlled price that your agency would set, as many cars as there were
buyers ready to buy. Who would get the cars that got produced?
You can always get a question that is so suppositious that it's ridiculous, and--
Why is it ridiculous?
-- I think you've almost succeeded. A--
Why is it ridiculous?
We're talking, Mr. Rusher, about prices--
We're talking about prices that return a fair rate of return, return a fair profit. We're
not talking about--
Oh, but if we're talking about prices and return--
Anybody, anybody, any fool could set prices that, that--
But we just agreed that--
That you wouldn't--
Didn't you just agree with me that the prices were not in the circumstances inordinately
high, and that therefore we have to control them?
No, I was talking -- I was saying, Mr. Rusher, and I'm sorry that I have to be so careful
to get this right. I was saying that we have an interaction of prices and wages, which everybody except you has
-- that is the cause of our problem.
Do you flatly deny any possibility that Detroit would not want to produce at the
controlled price, as many cars as there were buyers ready to buy?
Absolutely. There is no--
Do you guarantee that there would be enough cars for all?
I would guarantee that there would be as -- there would be all the cars that would be
At whatever price was prescribed.
Anybody who would set a price that did not return a fair profit would be an idiot, and I'm
Would you tell me--
-- assuming that the administration that you support is so, is manned by such
Would you tell me, Sir; do you intend to control the price of the car, from GM, or also
the price from the dealer to the buyer.
No, I would only -- I would strictly confine the control to GM.
You wouldn't mind what the dealer charged the customer.
The dealer is not himself a source of the market power that I am talking about, and
therefore I wouldn't bother to control it. I would--
You would only control the price--
Yes, I would -- I would not fix retail prices of any sort.
And who would get the phones produced at the prescribed cost of telephones. Everybody who
wanted them again?
You'll have to clarify this--
There would be no problem? What-
You'll have to clarify this point, because--
During the war, for example, the time we had--
--because my impression is that the telephone company already has fixed prices.
Well, they fix their prices, but they fix them in relation to the demand.
I'm sorry to tell you, Mr. --
Well, I know that--
--the Federal Communications Commission already fixes prices on telephones. This is
something you should have locked up before you came on to this program.
No, but they don't fix them under the same philosophy. They don't fix them on the same
philosophy, sir, that the price control would be fixed in your proposal, as I understand it.
Well, your philosophical distinctions are not mine. They are--
--they are fixed prices.
Tell me, does it trouble you that New York City, the only city in America with rent
control, has its most serious housing shortage, perhaps the most serious in America? Does it bother you at
I must say that I, we have lots of rent control here in Massachusetts.
How about the fact--
--that in New York City--
-- I'm not, however, an advocate of rent control.
You're not in favor of rent control.
But you do see some connection between rent control and the fact that it is, according,
for example, to the Wall Street Journal, becoming harder and harder to find a place to live, decent or otherwise,
in the nation's largest city?
Generally speaking, the prices, the rents have been fixed in New York City at below cost.
This is a form of price control that I would not advocate, as I explained at the outset.
I am talking only about price control where you have strong unions and strong
corporations. The real estate market on the whole is not a strong market, Mr. Rusher. It's a weak market.
What would prevent a manufacturer in one of these strong industries from cutting quality
in order to maintain profit margins?
Quite possible. He would suffer from it; the--
Why would he suffer from it?
The -- Well, the customers sooner or later, with the assistance of the--
The market would supervene, in other words.
Would you like me to answer the question--
--or do you prefer to answer them yourself?
I'd rather have you do it shortly.
Sooner or later the customers, with--the assistance of your colleague, Mr. Nader, will
find out about quality deficiencies, and this reacts unfavorably on the person who so deteriorates quality.
And what would you do about the recent wage hikes during your freeze period, the recent
wage hikes and price increases in the auto industry.
Well, this is a problem that Congressman Reuss and I have struggled with--
One of those details.
--and it's a... it's a detail, it's a difficult detail--
What are you going to do about it?
You will have to allow those unions that got caught just before a contract period, or
whose wages have lagged behind, to come up. This, however, is very different than having the large gross increases
that go with with--
In other words, a catch-up rather than a rollback.
Oh, absolutely. Sure. You--
And you would have to allow catch-ups in the entire auto--
--industry to the extent that they went beyond the--
--and as -- Yes. And as compared with the massive increases that you're getting under the
Nixon Administration, this would be a breeze. It will be practically stable prices.
Last question, Mr. Rusher.
And with regard, since you put great stress both on this and in your most recent book on
the power of the concentrated industries -- would you tell me what happened to poor Henry Ford that he was not
able to impose the Edsel on the American people?
If the industry is as powerful and can create the demand that you contend--
This is, again--
This again gets off into a philosophical question that--
--has no relation to the subject.
I think it does, because it has to do with the ability of these industries to control the
Well I have never suggested that this demand was perfect, and that the fact that there
will be accidents like the Edsel...
Pretty big accident.
And that these have formed themselves on your mind would indicate that generally speaking
the control is pretty good.
This is known as the market economy, isn't it?
But this -- but generally speaking, this is, if I may be helpful to you, this question has
no relation to the subject under discussion.
Well, gentlemen you've been so helpful to each other, I'm--
--forced to intervene.
Professor, would you be advocating this drastic plan were it not for the--
Well this is, I don't accept--
--fact that the nation is at war?
Let's not worry about the characterization. Would you be advocating this plan if the
nation were not at war?
I must insist on judicial impartiality here. This is not a drastic plan; this is a
common-sense reaction to a peacetime -- to a situation; I would be advocating it given the circumstances, war or
Thank you very much, Professor; we liked having you on THE ADVOCATES. Mr. Miller?
We have to make an attempt to stick to the issue, and fortunately or not, rent control and
the Edsel simply have nothing to do with it. The problem is setting prices in those heavily concentrated
industries that dominate the economy. But there's another side to the problem. Those who oppose this plan have a
heavy burden, because the inflation is going up, and apparently the unemployment is going up. We have taken their
advice before, and we now see where it brought us. Those who continue to defend the current Administration and
simply recommend more of the same have a heavy burden to demonstrate to us that at last it will work.
Thank you, Mr. Miller, we're going to be back to you for rebuttal, as we usually come
back; Mr. Rusher, why do you oppose the Federal government adopting a permanent system of wage end price controls
for selected unions and industries?
Everybody knows that prices have been rising steadily in America in recent years, and a
glance at your daily newspaper will tell you that union wages are on the increase too and are, in fact, one of the
big factors in pushing prices upward. But the union worker feels that he must demand more pay in order to keep up
the prices; and so we are faced with a sort of vicious circle, or rather a vicious spiral, in which wages drive up
prices, and higher prices result in demands for still higher wages. What can be done about it? As I said earlier
in the program, inflation is basically caused by a too-rapid expansion of the money supply relative to the actual
wealth of the country. The Nixon Administration is trying to slow this expansion. Inevitably the process is
painful, especially in its early stages, for this is accomplished by the reduction of government expenditures and
the tightening of credit which must result in something not far short of a recession in the short run -- including
a temporary increase in the level of unemployment. But once the medicine is swallowed, the benefits are sure: a
sounder dollar, and a healthier economy once again. Look at this chart of the rate of increase in wholesale end
retail prices. The rate of increase, not the actual increase in the prices themselves. Prices have risen steadily,
to be sure. But note what has happened to the rate of increase. Up it went, all during the later Johnson years;
then beginning with 1969, the rate of increase began to decline. This decline is the direct result of the sound
economic policies of this Administration, and is the best evidence that it is succeeding. What we need now is
patience, and determination on the course already decided. Mr. Miller and Mr. Galbraith, as you have seen, have
another, and at first glance a far simpler idea. If wages and prices are too high, just pass a law forbidding them
to go higher. What could be simpler than that? Or deadlier. For back we will go to the price-control days of World
War II: to the ration books; and the black markets; and the cheapened quality of price-controlled goods -- and
this time without even the sanctions provided by wartime patriotism. Wage and price controls have never really
worked, and never can; and here to tell us why is Professor Milton Friedman, of the Department of Economics at the
University of Chicago.
Professor Friedman, welcome to THE ADVOCATES.
Professor Friedman, what causes inflation, and what should government do to prevent
Inflation is always and everywhere caused by too rapid an increase in the quantity of
money compared to the output of the economy. Inflation is one of those phenomena that we have observed over and
over again over the centuries; we have an enormous amount of information on it; I know of no inflation which has
been caused in any other way.
Why do governments permit too rapid an increase in the supply of money?
Most of the time it's because it's the easiest way to impose a tax on people to pay
government expenses. It isn't always--
It isn't always a result of deficit, but most of the time it's to help pay government
Now if the basic cause of inflation is, as you say, a too-rapid increase in the supply of
money, and the Nixon Administration has been following, in its basic outline, the policy of reducing the rate of
that expansion, and we do have, no question about it, still high prices and still relatively high unemployment; is
this delay in the consequences, in the cure, something that should be of concern to us?
Of course it should be of concern. We'd like to have the cure work instantly. But there
are no instant cures. And we know from experience that there is always a delay between the slowing down in the
rate of monetary growth on the one hand, and its effects on the economy. That delay is composed of two parts: The
first part, which typically runs about six to nine months, is between the slowing down of the rate of monetary
growth, and the slowing down in the physical economy, the tapering off of output. That occurred -- the monetary
growth slowed down at the end of 1968, and about the third quarter of 1969 the economy started to show the
effects. The second delay is between that point and inflation. That takes another six to nine months. Because
inflation only tapers off as it turns out that the markets aren't there to support the higher prices, the steadily
growing prices. And the chart you showed a moment ago reveals those -- that delay very well. There's been about a
12, 15 months delay between the onset of tighter money, on the one hand, and the tapering off of inflation. But
inflation is now coming down -- the rate of inflation -- and coming down very sharply.
Do wage and price controls, as suggested by Professor Galbraith, whether selective or
otherwise, actually work, though?
Well, we have 2,000 years of experience with that too. The most remote ancestor to Mr.
Galbraith's plan was Emperor Diocletion of Rome.
Another great man.
Yes, another great man. His edict was carved in tablets of stone, but it didn't do any
good. The prices weren't maintained; prices continued to go up; and the edict was a complete failure. And this has
happened over and over again. Let me point out one thing about the selective aspect of it. There has been much
talk here about unions producing inflation. Only one out of four American working people are members of unions,
and not all of them are members of very strong unions. It is impossible for a major inflation to be produced by
what happens to the wages of one out of four people. Moreover, you have had inflations with and without unions.
Our unions were strong in the 1960s; and we didn't have inflation. The connection between strong trade unions and
inflation is not very, very direct.
Tell me, Sir; you heard Professor Galbraith pooh-pooh the idea that under a price-control
policy Detroit would under any circumstances produce fewer cars than there were willing buyers for; did that sound
to you like un accurate prediction of the result of this price-control plan?
Well, if you don't fix the prices that the retail dealer charges, then--
Which he's not going to do.
Why of course. Well then any apparent shortage of cars at the wholesale level will simply
show up in larger retail margins, as happened after World War II when we continued to have price control on cars;
and we all know that what happened was that dealer margins widened very much by paying lower trade-ins. Somehow or
other, if you have the money in the system, if you pour money in at the top it's got to come out somewhere. And if
you try to hold down particular prices and wages it's like pinching one corner of a balloon. All you do is push
the pressure elsewhere.
Professor, Mr. Miller is waiting to present Emperor Diocletian's side again. Mr.
Not Emperor Diocletian.
The noblest Roman of them all?
I'd rather present the side of the four million people out of work, and the people whose
real wages are going down, and who are very interested in your theories, and who are entitled to ask, when will
the inflation end, and when will the unemployment go down.
They certainly are entitled to ask. They are the innocent victims of the disgracefully
inflationary policy followed by the Johnson Administration. There has never been inflation in history which has
been stopped, in any country, without an intervening period of economic difficulties. Now the striking--
I'm going to interrupt just to ask that you answer the question.
When will it end?
The inflation is--
Not your answer. The inflation.
The inflation is--I hope the inflation will end sooner. The inflation--
Let me say based on previous experience, there's no chance.
The inflation is tapering off now; the question of what an "end" means is itself not
obvious; I expect the rate of price increase to be down to something like two percent by a year, a year and a half
And what level of unemployment will be necessary, with a strict system of monetary
control, to maintain a price stability at two percent?
Well, the interesting thing is that this recession, as part of the process of stopping
inflation, has been the mildest recession in the post-War period.
You're speaking now to the four million out of work?
I'm speaking to the four million out of work, and I am saying, well -- you know the
meaning of the unemployment figures is a little more sophisticated than I think you've recognized, Mr. Miller.
Most of the people -- there are many more than four million out of work. But there are different people at
different times, and they are out for short intervals. What you have are people losing one job, and most of the
increase in unemployment consists of raising the time between jobs, from something like four or five weeks to
something like six or seven weeks on the average.
Those people who have been on--
-- unemployment for 13 weeks will be happy to hear that.
Of course. As I say, they are the innocent victims of the disgraceful inflationary period;
we are now tapering it off; in my opinion the economy has come to a bottom and is starting to come up--
Well let me ask you--
I expect unemployment -- it may continue to rise mildly for another quarter or so, but I
expect that beginning in the first or second quarter of next year, it will start coming down and will start coming
down fairly rapidly.
I'll make a deal with you. Take as long as you like but answer the question. At a two
percent rate of price--
If you ask a reasonable question, I'll be glad to answer you very briefly.
Well, no. Not only, not only is this reasonable question, this question is at the heart of
the matter. Under a system of monetary controls, to achieve a two percent rate of price stability, what level of
unemployment would we permanently have to have.
Oh, permanently? We will permanently be able to have full employment. There is no
inconsistency in my opinion whatsoever between full employment, high level of employment, and stable prices. I
expect that if we can last through the transition period and not restart the inflation, if we last through it,
then we will have a negligible unemployment, and we will have non-inflationary growth, with unem -- negligible
inflation. And unemployment will be down to the level of about four percent which most people regard as the
minimum that is possible for frictional purposes.
Oh, so you do accept. You say "full employment." By "full employ" -- you define "full
employment" as four percent unemployment.
Everybody defines it -- there is no such thing as literally full employment. Everybody
defines full employment with the recognition that some people are each year going to be starting in the labor
market, the students will enter, end their course; housewives who have been out of the labor market; people who
want to quit one job in order to change to another; a situation in which nobody is unemployed would be horrible
Certainly, we don't really have a terribly bad situation now, do we, it's not terribly far
over the four percent--
We don't have a terribly bad situation. Unemployment in 1961, Mr. Miller, went well over
seven percent. Over seven percent. Any unemployment above the minimum necessary for frictional purposes is too
much, of course.
Now, we have tried your theories; the Administration has been trying monetary restraint
for its two years; despite the chart, which we will talk about, people who go to the market know that prices are
continuing to go up; are you opposed to trying the wage and price controls -- your theory has been tried. Are you
opposed to trying them? See if they do--
I beg your pardon. The theory that I am speaking of has not only been tried; it is the
only one that has ever worked over history. Wage and price controls have been tried over and over again; they have
never worked. Just recently, Great Britain gave up a wage and price control board established a few years ago; it
was abolished. Canada has announced that its program of wage and price control will be abolished as of January
first. It's already been abolished. U.S. guidelines didn't work.
We're not talking about guidelines.
There is not a single case on record--
We're not talking about--
You're not talking about an untried theory. You're not talking about a new idea that is
suddenly a novel--
Why hasn't the monetary theory worked?
--notion. You're talking about the -- it has worked.
It has worked. That's your final testimony?
It has always worked--
And it is working now, as these figures show.
Gentlemen, we can't do any better than to declare it a result. Thank you very much,
I was particularly glad that Professor Friedman managed to scotch the notion that Mr.
Miller had come here this evening with some grand new plan. It was nice to know that even Mr. Miller, that
innovator, has gone back to Diocletion for his solutions. For our next witness, having discussed the technical
economic aspects of the matter, we will call upon a gentleman who has addressed himself to some of the
philosophical implications of government in our society, a columnist, television personality, and the Editor of
National Review magazine, Mr. William F. Buckley, Jr.
Mr. Buckley; a warm welcome to THE ADVOCATES.
Mr. Buckley, I believe you are the editor of a small journal of conservative opinion. Is
Well, sometimes the publisher doesn't perform his duties enough to enlarge it.
It isn't in any case so large a thing that Professor Galbraith, or even Emperor
Diocletian, might get excited and try to control its price.
No, only the quality of its product.
And you won't let them do that. Mr. Buckley, is control of wages and prices an appropriate
function of government, in your opinion?
Only of a government that has completely collapsed in its fundamental responsibilities.
It's quite true, for instance, that if governments fail in statecraft, it is necessary for them to conduct wars.
By the same token, I think it is necessary for a government -- for instance, the government of Castro Cuba to
ration sugar in the greatest sugar-producing country in the world. By the same token, I think Mr. Friedman and I
would agree that there are circumstances under which a government might so screw things up that for a period of
time it becomes necessary to undertake responsibilities that it ought never to have to undertake.
But then is that the situation, or isn't that--
--Professor Galbraith contends has now arrived, that only wage and price controls can curb
the overweening power of some unions and corporations.
Well, Mr. Galbraith always profits from, from the failure of his prescriptions, and it is
true that over the years, he has envisioned the perfect society as one which is, roughly speaking, dominated by
himself. And, under the circumstances, under the circumstances, having never raised his voice during the '60s to
warn us of our overspending, in the '70s he tells us that as a result of his failure to do so, we're going to have
to go and turn our country into the economic equivalent of a police state, which is exactly, of course, what price
and wage controls is.
And now; I'm certainly as eager as anyone else to avoid the kind of police state that I
quite agree with you Professor Galbraith seems to be working slowly -- or perhaps not so slowly -- toward. But
what can be done, then, to curb the power of big unions and of big corporations who may get too large for the good
of the country, themselves?
Well, Mr. Friedman -- Mr. Friedman said, of course, that we do need patience; it takes a
while before you go from the state of being overweight to the state of having a normal weight. In between you're
still overweight, but you are moving in the proper direction. And you can't go from, say, 150 pounds to 130 pounds
without traversing 140 pounds, which is what we are in right now. I tend to disagree with Mr. Friedman, which
takes a lot of chutzpah, on the extent--
I hate to see this economic jargon coming in here.
On the extent, on the extent to which certain unions exercise a monopolistic, or
oligopolistic, if you like, leverage. It seems to me plain that there are certain situations in America in which a
people are engaged in manufacturing products, for which there is an absolutely inflexible demand, and that they
have, as a result of the indulgence of Mr. Galbraith and his heroes, over the years, acquired certain immunities
from anti-trust restraints, the effect of which is that they can in fact charge us pretty much what they want.
This I think we ought to do something about.
One last question, Mr. Buckley; you noticed Professor Galbraith's statesman-like
unreadiness to apportion blame in this matter of price and wage rises. Could you go back over that for me for just
a moment. It seems to me that there was something more to be said that he was somehow unwilling to say. Could you
tell me what it was?
Sure... Mr. Galbraith is an economist, but he is also things like the president of the
Americans for Democratic Action, and just as the president of the Americans for Democratic Action never criticizes
the labor unions, I think just as Catholics never criticize the Pope. And under the circumstances he finds that he
can take shelter under his grand impartiality, which is so useful to him, when in fact the alternative is to
finger people whom he has been coddling over a period of 20 or 30 years most assiduously. Under the circumstances,
he keeps talking about, you know, General Motors, as though it were responsible -- or, say, Boeing Aircraft, as
though it were responsible for economic policies which have reduced the price of Boeing from 120 to 20.
Let me interrupt, Mr. Buckley; I don't think Mr. Miller wants to pass. Do you?
Mr. Buckley, you're certainly not here as an economist; I take it you're here for your
symbolic value...Tell me, when you blame Mr. Galbraith for his--
It is not inconceivable that I know more about economics than you.
I had hoped that in your direct examination you would demonstrate it, but -- let me ask
you. When you said that Mr. Galbraith had advocated over-expenditure which caused the inflation, isn't the real
problem something that in fact he opposed--
--that is over-commitment in Vietnam, a government policy responsible for the
Absolutely not. Because Mr. Galbraith never said we oughtn't to spend as much money as we
are spending; he said we shouldn't spend it in Vietnam, we should spend it on his pet projects. Next
Well, you've not read those passages in The New Industrial State where he points
I have read all the passages in The New Industrial State.
Well, you haven't read the one that I am, that I am thinking about.
Which you are about to quote?
If you're about to quote, what does it say?
Yes. It says that at once--
It says that at once Professor Galbraith thought that in fact; there would be an exact
transition from defense expenditures to peacetime expenditures, but he now understands that could not take place,
because of the enormous growth and octopus of the defense industry; in fact there would be a slower transition
than you could achieve equilibrium.
It was only, you know, a couple of weeks ago, which is after he wrote The New Industrial
State, Mr. Galbraith said for instance, that all of the problems of New York, or all that he could think of, would
be cured by merely doubling the budget. In fact it was doubled in the last four or five years--
-- none of the problems have been cured. They're in fact worse.
Now if I -- I think you've conclusively shown you--
Please don't embarrass Mr. Galbraith by suggesting--
I was going to say for those of our viewers who may have tuned in late, I want to testify
myself, that Mr. Galbraith is alive and well, in station WGBH, right here in Boston.
It is also clear that Mr. Buckley has come here less to talk about wage and price controls
than about Mr. Galbraith.
I'll talk about anything you'd like...
Let me ask you about wage and price control. Do you think that the price controls that now
in fact exist, over public utilities, whose prices have remained stable--
No. I approve of them.
-- for example, the -- You approve of them.
I approve of them because they--
You approve of them. Now why--
--because they deal -- they tend to administer unto situations in which there is a natur
al monopoly. If there is only one telephone company, you've got obviously to regulate the price that it charges
for its services -- incidentally, Mr. Rusher was as usual correct, because the price of telephones is not
regulated. Western Electric can charge anything it wants to to AT&T for the cost of its actual telephones go
We were talking about the price of telephone service. But now when you talk about
monopoly, what about the Aluminum Company of America, which has an effective monopoly, over aluminum, is a
concentrated industry, is in the identical position of the telephone company in its regulated prices and the other
monopolies; isn't there as much reason for moving in then and regulating those industries as well?
Sure. Stop your ban on Rhodesia.
I'm sorry. I don't understand what that has to do with it.
Bring some aluminum from there. The answer is of course that aluminum in this country is
not a monopoly situation; but, if it is, I'm a hundred percent with you in suggesting that it should be
That takes care of aluminum; now let's look at automobiles. We have three firms that
dominate the market; that charge exactly the same--
You don't. No you don't.
--prices. We don't?
No. You don't. You don't. You can go down in Boston tomorrow, and select an automobile
from about, oh, I would say 25 firms; so General Motors is, to a considerable extent, controlled not merely by
Ford, or by the other companies, but also by what you can buy from Japan or England.
Well, I'm glad we've put your economic knowledge to the test. Economists generally agree
that the oligopolistic industries -- three automobile companies control over 60 percent of the automobile market.
That's just an effective power to set prices as the one aluminum company. If that's true, then shouldn't we just
as purely regulate the automobile companies, as you have said we should regulate the aluminum company?
No. Certainly not. Because, if one were to say, for instance, that 60 percent of the
people in Boston read a particular newspaper, it doesn't follow that you should under the circumstances regulate
the price that that newspaper can charge you. In fact that might even pose a Constitutional problem. But the
I don't understand why you want to talk about rent control, and newspapers; let's talk
about the issues.
You should not -- you should not control -- look, if you want a very straightforward
answer to a very complex question such as this, you should under no circumstances control the price that any
company charges you if there is a reasonable alternative in the buying of another product.
Now. You do admit, you do admit, that there have been -- you discussed the anti-trust
failures of certain large corporations and unions -- there are in fact in large parts of the economy, at least
been some violations of the anti-trust law that create a power imbalance, is there not?
Oh, by all means. I--
In those areas the market does not function, does it?
The market never functions when it doesn't function. Is that your observation?
No. The market never functions in the cases where you've said the anti-trust laws are
violated; in those cases--
Well, that's right. Go after them. It's like saying that you have crooked mayors, or
Go after them. But what if in fact--
--the question is should you cease having judges?
But what, in fact, under what you're now -- what you call a violation of the anti-trust
law, which is where the market doesn't function, constitutes the largest markets in the United States. Then don't
you have to go after them?
If -- look. If you are saying that the law is imperfectly administered, I agree with you.
If you're saying that two generations of Democratic administration have not performed adequately, in enforcing the
anti-trust laws, I agree with you. If you are really suggesting tonight, which would make it historic, that we
ought to pass laws which also make it a violation for labor unions to operate in restraint of trade, then I agree
with you -- very enthusiastically.
But in fact it's the combination. Suppose you did that?
Gentlemen, I'm sorry. I was particularly sorry, Mr. Miller, to interrupt your question, in
that -- interrupt what may be a historic moment, but Mr. Buckley, our time is over; thank you very much; Mr.
One cannot escape the feeling that there is a certain deadly inevitability about the kind
of argument that Mr. Miller makes here; he has complained oh, so loudly, about the four million unemployed; he's
been practically down on his knees until they're raw, worrying about those people; but it only came out on
Professor Friedman's cross-examination that in the golden age of John F. Kennedy, when Professor Galbraith was our
Ambassador to India, and all was well and Mr. Miller was happy, the unemployment rate was higher than it is today.
It was then seven percent. And nobody seemed to feel in Elysium at that time that there was anything terribly
amiss; we are going through a period of adjustment brought on by the ruin created by these men, and it is going to
take time and trouble, thanks to them.
The year 1961 was picked very carefully, of course, because it was in the following years
from '61 to '65, that the country returned to its lowest rate of unemployment and its greatest period of price
stability and economic prosperity. Let me tell you something about the kind of statistical argument that's being
made. The chart. Professor Friedman's argument that the rate of inflation is going down, and that's why things are
getting better. You've heard that said. The rate of inflation is going down. That amounts to a statistical fraud.
Let me illustrate to you. Let's use the weight control example of Mr. Buckley. If you weigh 150 pounds, and you
gain 10 pounds, you have a rate of gain of weight of roughly one-seventh, or 14 percent. If you gain an additional
eight pounds, the rate of gain has gone down. You can look at your scale, and you can say, well now I'm only up to
168, that's two pounds less than in the previous period; therefore my rate of gain is decreasing. And then you
gain another six pounds, and your rate of gain is decreasing further. Then another four. Or a train speeds along,
at 60 miles an hour into a bridge. First it goes up to 65, then it goes to 68. Its rate of gain is decreasing. The
rate of gain can decrease in the face of the kind of pressure and inflation we're now handling. It is, in fact, a
statistical fraud to explain something that is not occurring. The rate of gain is going down as in these cases;
the inflation is still galloping along. To talk to us more about what must be done, about what must be done in the
real world -- not the world of statistics that don't exist or the world of theories that don't work, but in this
world -- we have asked Congressman Henry Reuss of Wisconsin to join us tonight.
Congressman. Welcome to THE ADVOCATES.
Congressman Reuss is Chairman of a Subcommittee of the Joint Economic Committee of the
Congress. Congressman Reuss, you've heard these rosy predictions that things are getting better, and will only get
better if we do more of the same; what do you think of them?
They're the same thing we've been getting from every conservative economist for the last
24 months; things are always getting better; instead they've gotten steadily worse; the worst unemployment in a
decade, and a grinding inflation; it is perfectly true, as Counsel -- Mr. Rusher said a moment ago, that John
Kennedy did acquire a seven percent unemployment rate when he took office. Instead of grumbling about it, and
saying there was nothing he could do about it, he rolled up his sleeves and did something about it, and brought
unemployment steadily down; the Nixon Administration has brought unemployment steadily up and inflation steadily
What will now happen if nothing is done?
Who will be hurt?
I think it will be--
--talking about people, despite Mr. Rusher's disinclination.
I think there'll be more of the same; I think we're going to have a continuation of the
outrageous combination of inflation and unemployment; and the people who will be hurt will be everybody. The young
people who can't get a job or a home, and if they happen to be black, they have half the chance; the old people
living in grinding poverty on a pension or social security; the average working person is today making less in
real income than he was two years ago; and everyone is going to suffer because their cities are falling apart
because of inflation. They can't pay the policemen; the trash goes uncollected; it's a real mess.
Congressman Reuss, you are the author of a law that now gives the President the authority,
simply on his signature, to freeze wages, rents, prices, interest; all economic activity. Should the President act
under that law? What should he do?
He certainly should; he should act tomorrow, by imposing an across the board freeze on
prices and the rest of it; he should tomorrow afternoon call to the White House the leaders of labor and business
in this country, representatives of the public; give them a good room to work in; and tell them that just as soon
as they come up with a voluntary agreed program of long-term wage-price guideposts and incomes policy, what you
will -- then the compulsory controls can and will be lifted.
And if they do not so agree, then the proposal--
Then I see no alternative but to continue them, but I, I want to make it clear that I
think that business and labor is patriotic enough so that they would come to an agreement.
One more question. We've heard tonight, and we constantly hear whenever wage and price
controls are discussed, the experience of the OPA. You were an Associate General Counsel at the OPA isn't this
terror; will there be black markets and unenforceable conditions; will there be rationing?
No, I think the OPA experience is constructive, because the OPA did a terrific job of
controlling prices. What was not so easy, and what was marred with some failure, was rationing, of automobiles,
tires, red meat, sugar and so on; but today there are no shortages; there's no need for rationing; it isn't
included in the authority we gave the President; incidentally, President Nixon was at the OPA, too, but he got his
rather dour idea of price control because he worked on the rationing side -- frankly, that didn't work very well
-- Mrs. Nixon was at the OPA too, and she worked on the price control side, and I think she did an excellent job,
I'd like to see her back.
Thank you very much. Mr. Rusher.
Professor Reuss, uh, Congressman Reuss--
--I beg your pardon.
I didn't mean to insult you. Congressman, did the -- did the bill that you voted for in
June giving President Nixon the power to impose a temporary wage-price freeze provide any mechanism of enforcement
of that freeze, once he proclaimed it?
No, we left it to the President to--
That was nice of you--
We left it to the President to come to us and we said then, and I'll say again tonight,
that all the President has to do is to impose such a freeze, and come to us and tell us the number of enforcing
officials he needs, the budget he needs, and we will stay in session day and night and see that that's
It will take about 24 hours to fix him up.
--kind of a grandstand play, though, wasn't it, to grant him the power to freeze prices
and then not give him any money or any enforcement mechanism with which to do it. At--
No, not, not really--
-- you say, come to us, and we will give it to you.
It's a nice gesture.
Not really a grandstand play, because I think the Administration has to be the one to work
out the details of an across the board freeze; I would say, however, that if Mr. Nixon wants to come to the
Congress and tell the Congress that he wants us to impose an across the board freeze, and will give us his idea of
how it should be worked out, I'll stay in session night and day and pass such a law too, I think it makes much
more sense to do now what was done in FDR's day when the Congress gave him the power to impose the
Back in June there was an amendment defeated by a vote of 270 to 11, I believe, to make
the freeze mandatory, is that correct?
That's correct, because the timing, the date on which it takes hold, the exception
machinery; are all, it seems to me, proper subjects for the executive branch.
-- the President--
Therefore I was not one of the 11--
No, you were one of the 270.
I think that was an irresponsible -- I think that was an irresponsible--
You were one of the 270 who voted against making them mandatory.
Right. Well now what has changed your mind. Why are you now for Professor Galbraith's
Oh, but you're, you're playing games with the--
I'm asking questions--
You're playing games with the word "mandatory."
I and the rest of Congress voted for the law, and it is now law, which allows the
President to impose mandatory controls, i.e., to stop price increases; what we didn't--
But not to require them?
What we didn't do was to have Congress itself try to enact a ceiling, because a ceiling is
quite delicate thing, and--
Isn't that what Professor Galbraith wants to do?
--and if we -- No. I think--
He does not want it either. I may be wrong. I thought that he wanted to impose
I'll, I'll speak for both my friend Mr. Galbraith and myself; which is that we both want
to lodge in the executive branch the power to impose mandatory--
--price and wage controls across the board; but we would leave the exact timing, the
selection of an effective date, and ---
And how about enforcement?
--other details to the President.
What about such details as enforcement? During the War it took 45,000 full-time
bureaucrats and about -- I guess 55,000 or more -- and a volunteer staff of some 450,000. How are you --?
--are these going to be provided by a complaisant President?
I'll tell you. I'll tell you.
That figure you gave is grossly inflated; the volunteers had to do with rationing, and
two-thirds of the professionals had to do with rationing.
--rationing is required sometimes for price--
--with a relatively small staff, it would be--
You don't think rationing--
--possible to impose the kind of a price freeze that we're talking about, and the country
would be much better off for it.
But you don't think that rationing would be necessary at all?
Let me got away from rationing for a minute. Professor--
I've fallen in, but I don't think I'm discrediting you; Professor Friedman talked about
2,000 years of history that this has never worked; I'm fascinated that men of such distinction as Professor
Galbraith and Friedman would have such a variant view of history.
If people read history--
Isn't Congress worried about that?
If people read history in different ways. I remember the Emperor Nero fiddling about
monetary policy while Rome burnt. That isn't going to work either. I think it's much--
That may close this program on the right note.
--much more important to forget about Diocletian, and look--
May I have one last question?
--at the needs of people in America tonight.
Congressman, thank you very much; Bill, we're out of time; I enjoyed having the last word.
Can we now go to our summaries: Mr. Miller, you have a minute.
One specious argument follows another. The President now has authority to freeze wages and
prices, and both Professor Galbraith and Congressman Reuss say he should do so. If the proposal were that Congress
should enact it, there would be an immediate argument, with some merit, that in the interim period, in the months
it took Congress to pass it, prices would anticipate and go up. The existing mechanism is here; this is the way to
do it; the President should act. The real question is whether Professor Friedman's theories, and Mr. Buckley's
wit, are worth four million unemployed and runaway inflation. However highly you value them, they are not. The
inflation continues unabated, despite the chart that does not prove anything. The unemployment continues. The
Administration must act. The way to act is a wage and price freeze. It did stop prices in World War II and in the
Korean War; it can now; it can maintain a stable economy.
Thank you, Mr. Miller. Mr. Rusher, you have one minute.
I hope you will note how diligent an effort has been made to scare you tonight. The
present situation has been depicted to you as America's darkest hour since the great Depression. And Mr. Miller,
Professor Galbraith and Congressman Reuss have assured you that things are going to get worse, and worse, and
worse; this is an easy game to play, and one well calculated to stampede us into a vote for rigid, permanent price
controls. I urge you not to lose your head, or your grip on the economic fundamentals. America was led into this
mess by a profligate administration that gave no thought for the future; it is steadily being led out of it by a
return to the hard but simple principles of basic economics. It was old J. P. Morgan who once said, "Never sell
America short." It was good advice then, and it is good advice today. This country's future, Messieurs Miller and
Galbraith to the contrary notwithstanding, does not reside in black markets and ration books, but in the free
energies of its people, and I ask you to bet on those energies, and vote against tonight's proposal.
Thank you both. Now it's time for you at home to express your views. Should the Federal
government adopt a permanent system of wage and price controls for selected unions and industries? The question
is: what do you think? Let us know. We'll tabulate your views; we'll make them known to every member of Congress,
to the President, and if we could, to various emperors in history. So vote now on tonight's question, and write
us, THE ADVOCATES, Box 1971, Boston 02134. If you have comments on the program, assuming they're polite, we'd like
to hear them, too. Remember the address: THE ADVOCATES, Box 1971, Boston 02134. On December 1st, THE ADVOCATES
debated the question: "Should the Federal government guarantee a minimum income to every American? As of December
15, two weeks after the broadcast, we received 10,870 responses; those in favor: 25 percent, opposed: 75 percent.
And now, let's look ahead to next week.
(FILM) Senate committee is a position of enormous prestige and power. Any change in the
seniority system, which now guarantees the line of succession, would considerably alter the power structure of the
Next time, from Washington, DC, THE ADVOCATES consider the question, "Should we abolish
the Congressional seniority system?"