Defense, Controls, and Inflation.pdf - The Ludwig von Mises Institute

2 Defense, Controls, and Inflationprevent the government from getting resources for the defenseeffort by bidding.them away from other purchasers.In addition to the agreement on the above specific proposals,there was also agreement that a mobilization program shouldbe judged by the consequences of indefinite continuance. Therewas hope and, indeed, some belief that the emergency wouldbe of short duration, but no one held that policy should bebased on this hope. It was agreed that general fiscal and monetarycontrol could be continued indefinitely without interferingwith long-run objectives of public policy but that widespreadallocations and direct wage and price controls could not. Noone held that direct controls would be desirable permanentinstitutions. 2 At the same time there was considerable feeling,which was given strong stimulus by the report on the Britishsituation, that public irritation against Widespread direct controlswould necessitate their eventual removal. Hence the im..position of such controls during the emergency would in factnot involve a permanent commitment to central planning. 32. MR. STEIN: I do not think this paragraph adequately explains theframe of reference with respect to the duration of the mobilization program.As I see it, the proponents of direct price-wage controls generallyassume that there will be a hump period in the mobilization program andthat the hump period will not last more than three of four years. I do notthink they would accept the proposition that the deSirability of directcontrols in dealing with the problems of the hump period should bejudged by the desirability of their indefinite continuation, if by "indefinite"we mean permanent. On the other hand, while accepting the humphypothesis, I do not think the desirability of adopting direct controls inthe emergency can be argued without reference to longer-run implications.Many of the assertions made in support of emergency controls would, ifvalid, also support permanent controls. The argument that monopolybusiness and labor organizations will push up prices in a free market andthe argument that we cannot tolerate "rationing by the purse" are examples.I am personally less worried by the actual harm that would resultfrom a year or two of price control than by the long-run consequences ofthe kinds of statements one apparently has to make and believe about theAmerican economy in order to justify controls even for a year or two.S. MR. G. E. HALE: I was slightly disappointed that the' Introductiondid not touch upon the long-term effects of direct controls upon free institutio~s.While I recognize that the discussion of that aspect of mobilizationwas telescoped and perhaps contained little of permanent interest, thesubject seems· so vital that some mention in ~e Introduction would appearappropriate. Indeed, it mighf be possible to'effect some linkage between