Tonight, from Boston, the Advocates: Howard Miller, William Rusher; and the moderator Victor Palmieri.

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 two.

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.

Professor Gal-

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 it work?

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.

Thank you.

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 unions.

I am avoiding any effort, Mr. Rusher, to put the blame either on labor or on business--

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--

--but I--

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 about--

Good. Good--

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--

Indeed we are.

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 recognized--

Not quite.

-- 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 produced--

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 not--

Would you tell me--

-- assuming that the administration that you support is so, is manned by such people.

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--

I can see that.

--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 all?

I must say that I, we have lots of rent control here in Massachusetts.

How about the fact--

I'm not--

--that in New York City--

-- I'm not, however, an advocate of rent control.

You're not in favor of rent control.

No. Rent--

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.

And interestingly--

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--

Please--

--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--

Yes.

--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?

Well, if--

If the industry is as powerful and can create the demand that you contend--

This is, again--

--what happened.

This again gets off into a philosophical question that--

Go right ahead.

--has no relation to the subject.

I think it does, because it has to do with the ability of these industries to control the demand.

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--

All right.

--forced to intervene.

Thank you.

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?

You know--

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 peace.

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 it?

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--

--additional money.

It isn't always a result of deficit, but most of the time it's to help pay government expenses.

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. Miller?

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.

I am.

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 from now.

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--

I am not--

-- 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 situation.

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.

Last question.

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?

Of course.

It's worked.

It has always worked--

Well--

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, Professor Friedman.

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 that correct?

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--

No.

--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--

No.

--that is over-commitment in Vietnam, a government policy responsible for the inflation?

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 question.

Well, you've not read those passages in The New Industrial State where he points out--

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?

What? Yes.

If you're about to quote, what does it say?

Yes. It says that at once--

What?

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--

Well, I--

-- 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 ahead.

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 regulated.

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 answer is--

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 crooked judges.

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. Rusher.

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.

Mr. Miller?

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 up.

What will now happen if nothing is done?

I think--

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--

Thank you.

--I beg your pardon.

Thank you.

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 enacted.

Yes, but it is--

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.

Yes. Not--

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 regulations.

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.

And you voted--

-- the President--

And you voted--

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.

Right. Well now what has changed your mind. Why are you now for Professor Galbraith's proposal?

Oh, but you're, you're playing games with the--

I'm asking questions--

You're playing games with the word "mandatory."

Yes?

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 controls.

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--

I think yes.

--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 --?

All of--

--are these going to be provided by a complaisant President?

I'll tell you. I'll tell you.

Yes?

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.

Well, yes, but--

With a--

--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?

I do not--

Let me got away from rationing for a minute. Professor--

Thank you, Sir.

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 entire Congress.

Next time, from Washington, DC, THE ADVOCATES consider the question, "Should we abolish the Congressional seniority system?"