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

20 Defense, Controls, and Inflationtranscript will promote further discussion of it and of the companionissues of public lll1portance raised at the conference. 2424. MR. MULLENDORE: I have examined the statement of issues inclosedwith your letter and have only this to suggest: I endeavored (Ithink unsuccessfully) to raise the issue as to whether we are not now in avery serious economic condition. The conference did not devote itself tothe question, but Martin Gainsbrugh, Henry Hazlitt, and I did try topresent some facts and some conclusions which would indicate not onlythat we are about to overspend but that we have been overspending andovertaxing for many years.I raised the issue by asking the question: "Is this a sound prosperitywhich We have been experiencing since 1945?" As you know, I think it is aphony prosperity; that the country is in a dangerously unsound conditionvv'ith a debt burden ,,,hich it cannot now carry, to say nothing of theproblem which ,,,ill be created if we add to that debt burden. I think that,even before Korea, the fundamentals of the free market had been seriouslyimpaired by the advance of socialism in many areas and by Inanaged currencyand the very serious inflation which had already been built into oureconomic system.It seems to me that unless we discussed this question of "Where are wenow?" we could not intelligently discuss the question, "vVhere do we gofrom here?"MR. HENSEL(fronl a memorandum submitted April 19, 1951): Theeconomics of mobilization were discussed, in my opinion, in terms ofgeneralities and somewhat abstract economic laws and theories. Consequently,upon reflection, I have beconle more concerned with what ,,,asnot said and not considered than with ,,,hat was discussed at the conference.The statement that, by the end of 1951, defense mobilization will beconsuming 20 per cent of our national product seems to me too much of agenerality for practical use in making plans or determining policies.. It isobviQus. that defense activities will take a much larger proportion than20 per cent of certain materials and much less of others.Perhaps the generality of an over-all 20 per cent is sufficient for a considerationof monetary and fiscal policies, but I have difficulty understandingit as a workable concept when dealing with allocations, priorities,price-fixing regulations, and wage restrictions. There is no doubt that weall agree that every effort should be made to limit controls as much aspracticable, but it seems to me well within the realm of possibility that,,,e may need varying types of controls with respect to various matelials;for example, one type of control for tungsten and chrome, another typeof control for steel, aluminum, and copper, another type of control forcarbon black, etc. Similar comments may also be made, I think, with respectto price and wage regulations.I would be more inclined to regard the conclusions discussed on the lastday of the conference as baGkground material rather than as a plan foraction-until we have a pretty fair bill of the nlaterials needed for the de-