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July
LWV X
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<Oj
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FLATION.
Removal of wartime Controls
Prior to V~J Bay tbo&a who were *Lost directly concerned
frith postwar planning generally believed thai an orderly transition
t o a peacetime acdaoay would necessitate —IntarHifira of controls
over allocation of materials, rationing of cert in products, and
continued control over prices. Pr<&sature* dropping of controls, i t
was f e l t , would again invite a iSti&rp rise in prices and extensive
dislocation in economic activity.
Planned reconversion as an accepted policy waa f i r s t
reco^ni&ed in the program adopted by MB in June' 1944> Mien optimism
M t o the successful conclusion of the war brought the problem of
recofiversion to the forefront. This prograa Kn wn as the ttSpot
Authorisation Plan" allowed the production of civilian itess froa
available iiiateri&is on the b**ia of iiidividual authoriiiiit ions ?*:«.d©
at tne local level. M^nufactureis ^ere tlXowad t o purchase aacliifi*
tools and diaa out of surplus atocka for civilian roduction nod
build a working model of any product planned for poatmr production.
At the aaaw tliue, rastrlciiona on tne use of aiundnuis and iwgnaal iw
**ere relaxed. This pro^raai^ bowaver, never got fully uodaivaj because of the unexpected shift in the tide of the war brought on uy
the £>&tt,ie of-the isuxg©. borne attempt t o revit&iisse thia program
took place just before V-B Day on May 8.
Between V-E and V-J Wy, «PB raaovad liiLitatioas on a
large nu&D©r of siaall consumer goods ahleh amda _itt.le use of s t e e l .
hi addition, aodifleatlona v^ere «.de in trie Controlled Materials
Plan, p r i o r i t i e s ajnafcaSj and schadnXin^ procedures. Limitation
orders governing industries waich hu.d a major iap&ct on reoources
rtere continued in full force, aitnough »FB did provide pr-ocedures
to penait operations at a minimum rate for so;ae con^uisier durables.
There was also some relaxation of aajor Bftnpowar controls and the
ordart controlling construction a c t i v i t i e s wera relaxed wo that
increased annual dollar value limits on various types of construct :.::
Bight be undertaken without Wh authorisation. The Bar ended before
the success of these controls could ba evaluated.
the sudden end of tne a*r on August LU, 1945 wrought
drastic reductions in Bilitarj procurez^ent. The question of Budn~
taining coiitrol- 1—itlalaiy became a. Bftjor public issue. The
po;..icy of the ^dtainistration on t h i s h i t l e r **^s enumerated QQ
August id, 1945 (Executive Order 9599) by the Fraaidant, ivtien ae
instructed the federal agecies "to move as rapidly as possible
without andangarlng trie s t a b i l i t y of the economy toward the removal of price, vaga, production and other controls and toward th©
restoration of collective bargaining and trie fraa
The day following the surrender of Japcii, a l l controls
over ir.anpov.er , ere dropped and the OPA removed ration restrictions on
gkcolifte, fuel o i l , processed foods, and btfttipg stoves, hj trie
end of 1945 only sugar continued under rationing control. Severed
hundred items were removed frott price control frith in ths f i r s t
hundred d&ya after V-J Day. On August £lj 1945 **PB discontinued
the HControiled ifcsteriala Plan" which nad b«ccpM tue cornerotoae
of war production controls. The CMP sous & relatively simple device
for dominating the industrial economy by giving W?B complete control
of & few etrategic commodities such as s t e e l , copper, and aluminum.
A great ?may control and priority orders .; ere revoked bj the end
of Aqgttfftj including controls over most nctalfl except t i n , lead,
antimony, industrial consturction restrictions «ere first e<ubed,
cuid on October iii, 1945 construct! ^ order L-^l ^as revoked by IIPB
and «&h i t **eat a.1 limits op aei construction.
The production controls which s t i l l *ere in ei'iect on
feoTtobez 4, 194^ KBT* traaisftfrred to th« CiviiitJi Production Adainist rat loan
and »iPB was eiiiairuted. fh€fse arera Bcadnly controls of t e x t i l e ,
clothing, leotner, uic certain scarce materials auch as ruuber, t i n ,
lead, arid various chaaicale. Simplified p r i o r i t i e s and soa« ii.veatory
controls verf iX^o A.ort to
before tns end of ^u^utt 194>> the Office of defense
portation lifted ai::ost a l l it5 controls over i-otor vehicle* t^nd r a i l ro:- .s. Tne remaining controls W&PM wmM^Xy to supply tr«*n sport at ion
fa.cilitie£ for Jidiitary demobillsa.tion. On *ugust kl # 1945 a l l ^end
Le&se was iu^pended. T£b.z*lj in 5epte:.;;ber a ia.rge proportijn of the
controls over exports ff&9 lifted 6.ad coastal cJia intercocL^tal shipping was resumed.
Because of the threat of possible inflation, the President
at the end of tn« mar stressed tne need for an Economic Stabilisation
Progrma to nold tae price lin«. Trie Price A<^dnifitrator ma specifically
Lnstructed by the President (Executive Order 9599, Aai?ust 18, 1^45)
t o *take ctli nece, L-ary steps to tasux-e that tno cost of iiviag and trie
general level of prices fchaii not risie.*' Price increases coaid only
b« allowed if they aid not cause increases at l a t e r atageJ of production or distribution. •Mtg« incretises coula be made without approval
of the National «ar Labor Board, out only if such increaaea &ere not
t o be used to seek an increase in price ceilings.
However, reconciling Itibor d«au*nda lor higher K^^-S and
industries' dbnuuo4s for high#r prices and profits ^r^^ented dii"i'icui±iei
ivhich the i»tabilination Pro^;raia was, in the end, unaoie to solve.
However, through a process of slo^ retieat the Progrc_rn did delay and
reduce nmny potential *.ag« and price increases during the period.
Liquidation of the various prograaa i s dic-cussed b«lov.
Along i»ith llwfttt a l l airier groups, ic.bor wa^ restive
over wartime r e s t r i c t s . The no-stri&e pledge and the "Little
Steel" formula were aot popular. T ,e relatively tight, labor a
along *ith a reduction In take-home pay oecc,use of the elimination
of overtime in rsany industries, gare labor fc strong bargaining position, and when the President approved ia Minraatior 1945 the removal
of the Excess Profits Tax, labor demands for Vftfp increases became
insistent.
Without the no—strike ...ledge and labor cooperation the
National *»ar Labor 8o*rd could not function effectively and no
alternative plans raxd been prepared t o aeet iitmnilp of labor for
substantial rift increases. The resi^n&ti n of iftiliiam ^avis in
October 1945 •wrifctd the beginning of the end of an effective
government Magi policy.
By the end of October the iifunfi for substantial Wkgp
increases «aa *,iven formal recognition b, the President. in an
address to the Nation h« contended that industry M a whole could
gnuit WcA-©
it increases while "holding the Uoo* on prices. £xecu.tive
Order 9651> October 31, 1945 provided that *age increases could b©
used in justification for price adjustments from UPA in the
following instances: (1) a percentc.ge inerOAM ill «vera : e
s t r a i ^ t - t i i n e hourly earnings was not e..Auai to the 30 per cent
increase in the cost of living between J«n«AX7 1941 and September
1945* {<) There wvre ineqoltiM in v«age rates or salaries MMQf
plants ia the mm jjidustry or l o c a l i t y . (3) The present Wag9 rate*
Vvere inadequi^te t o recruit wyapovor in industries essential to r e conversion. The stabilization Administrator &&L given the power to
define additional classes »nere Kage increases couia be approved t o
correct saladjustaer&s and-inequities.
tianageaient, however, SMtintained that w&g* i
across the board coiud only De. granted if ;jrices vert allowed to
ri^e. The Labor Management Conference wiich convened on lioven.ber >>
1945 ended in failure on Moreaber 30, 1945, priaarilj because industry did not thinic an overall rage policj could be fosauXattatf
by such a coni'erence. 6jZi6 segments of labor supported milllejnrieiU * •
position.
In attempting to meet trie serious situation c&used by tne
work stoppages in the viator of 2.945-46* the ^resident appointed
fact-finding Doards to bear the major disputes and to Bake recoiamenaations for settleinent. Tnese rnromiiiFHiftit 11 inn had no force of
law behind tBOB and did not have to be accepted by the parties in
dispute. Thei-e boards in Boat iotftancoa agreed that vage increases
were necess ry, sad Mien the 18 cent pattern developed in FeDi'uary,
1946 upon settlement of —jor strikes effective wage controls were
almost eliminated.
—A—
In February, 1946, the National *c,ge &tabili»ation Board
ordered to approve as a pattern for guidance in approving
•rage acijustments In a given industry or locality.t'/'Q&e which had
already been worked out voluntarily, and OP A permit,tea price
increases «nere &uch wage i creases caused hardship t o an employer
(Executive Order 9697, February 16, 1946). After February, I946
the Board1 & .activities *ere Tilnly concerned aith processing cases
arisiug from violations of the genera.;, waft controls which iud
been in force before August 18, 1945 • In addition, direct wage
controls «ere —.Intainsfl until hovesiber 9> -L946 1B trie construction
industry and these controls were also handled by Nt»6B. The National
fih.de Staoilization Board «as terminated by an Executive Uraer effective
February 24* 1947 and no successor agency KM appointed.
Prices
The Office of Price Administration at tne start of 1946
i u faced with an almost overwhelming problera in maintaining
a price
stabilization program. The nholes&le removal of HPBfa controls had
eliminated many v»ar production controls which contained provisions
that t,ave support to GPA's efforts to provide low priced itsaa for
the economy. The breaK In the wage line in February 1946 posed the
question as to what action OP.A »ould taKe to cover increased labor
costs »hich resulted from wage awards. The agency attempted in so
far as possible to obtain the absorption of cost increases In tne
interraediary ttafM in the flo* of products. This absorption policy
as well <~s It a other efforts to — tntiiln tiie piice iUie met ^ith
strenuous opposition on the part of indumtry, ¥iith each aiiected
industry demandiiig relaxations in the prices of i t s proaucts.
During tne first 6 Months of 1946, 6O0 industry-wide price
lacreasss «.ere grctnts<i| 400 oi thsfi in ihs second ,|u. r t e r . By midfSj&T lj? per cex.t of a l l it eat which dad Deen under control n.d been
decoixtrolled. The CP& exoensica b i l l HU vetoed by President Truman
as being inadequate, and i t *as not until tluly *:f>, 1946 tfiat the
President sifnsd the revised OPA b i l l after a -c5 day la^se of price
control authority. During the *5 ct&y price control Ispts the Bureau
of Labor Statistics cost-of-living ind.x Shu—d an increase for a l l
foods of 18 p#r cent, with trie largest lncreasss being reported for
meat, poultry, and fish snlca rose 39 per cent.
The Price Control Extension j^ct proved to be only a.
temporary victory for ths advocates of r r i c e control. It *as in
the area of cgriculturai products that ths break-dovvh 01 controls
proceeded mo^t rapidly. The Decontrol i^oard bsjgan hearings on
August 71 1946. As a result of i t s deliberations, the *>oard
continued the suspension of controls 00 dairy products and grains.
I t found that these prices had not increased *unre«6on<*blyM since
June 30. But in tne j-ive^tock, cottOii^eed, and soy bsso : .r8a, trie
-5Board found that prices had risen unreasons blj and that price
regulation was prc.cticaOi.e.
Price ceilings *ere restored on :::eat
&ith ceilings averaging 10 per cent auove trie June 30 figure,
Retail ceiling prices for Meata »ere, I I O H U T I delayed until
ciepteniuer 8 which permitted dealers to dispose of the inventories
they had purchtuMd at overceiiing prices. The reap i.se of industry
t o recontrol *»ai> unfavorable tod tne flow of livestock declined
drastically and the continuing snortuge finally hidiH serious
enough foremergency action. The President announced an October
14, that the only solution ama to decontrol neat* ftathiit the next
weeK controls #»ere lifted on edible o i l s , Mid all Dy-product foeda
and iuixed feeds—indubtries closely allied to livestock in lustries.
On October *.3> -1946 &11 fooda ana beverages '^ere decontrolled
except sugar and &ug<,r solutions, corn BJTup and su-^-.r, blenaed
syrupy ond rough and milled r i c e .
On ftovemuer 9> 194& i t «&& officially cduiounced oy tne
Fresiaent tb«fc price control «at» at an tod uue to Uia difficulty
of continuing controls on a p a r t i a l uabis. Tne only exceptions
%ere nouoin^ accoflswad^iona, sagiur auid x*ice. On M^rcn 31> 19^7
the power of tne Bo^ra to control Sttg« i , tixe la^t couti*Q.iied ite-ju,
•*as extended t o uctouer ,>!, i'9-47 '^nen i t expired, iiice «as
decontrolled on June 30, 19A7* The Decontrol Board Baa liquidated
on December 3i> iyA6. Tne teiirunatlon of tr;e Board MM pieced in
tue nanvia of tne Treaour^-. Tne Control of rice (until June 30,
1947( aad ^ug. r ( u n t i l October 3i> 1947) WMi handled by the Food
Divioi.n of tae Depc.itraent of Agriculture,
Production
During 19-46 CPA operated-a ttreealiiied •jretea of
o r i t i e s , alloc tion, conserv tion oraer-o «ad ixwentory COi
The distribution af t i n , lead aod «. numbei- of chemicaito r—hintfi
imdei* s t r i c t control, ror other atiteri&la remaining unae-r eootroXj
only a limited segment of the bupply tUkM chaoseled to vrgeot
requirements and e^sentiai progr«JU through trie use of certifications
or priority ratings. Assistance in .vbtaining steel and merc-iant
pig iron, for instoiice, tear given only to a restricted lumber of
housing iteiiiS and «. few other urgent uses*. P r i o r i t i e s assist< lice
«as iijaited t o producers of alcohols^ leada^ LU;: oei, rubber,
fractional hoi^sepOrter motors and sorue n.:uoing ite^j ana lo%~priced
clotaing ttess. inventyries vere restricted t o a normal working
CPA ««as consolidated Kith OMfit, 016, axid OPA to fom
tue Office of Temporc.ry Controls on December 1*., 1946. Iti.
functions »»ith respect to the Veteran Emergency housing prograa
«er« transferred to the Housing Expediter jn April 1, 1947. CPA
w&.b temiiictted with OTC on June 1, ^947 and i t s functional t r a n s ferred t o tae Department of Coamerce for liquidcti n.
-6Manpo«'»er
The day following the ,,nnounceiuent of the surrender
of Jopan, a l l controls over MnpOMP v»ere dropped tag the fear
Mojipo«er Comaiiission, -nd on September 19, 1945 the agtncy MM
abolished. The United States Employment Service mich had been
under the direction of MC during the war MM transferred to the
Department of Labor.
v.hen the Japanese surrenderod, the ivrmed Forces almost
immediately be6'an the demobilisation process., and lowered t n e i r
demands on Selective Service. The Armed Forces revened a peak
monthly rate of demobilization of 1.6 million In i\ioveiLber and
December of 1945, and by trie end of 1946 demobiiiz-liou »*as
practically completed.
Selective Service continued in operation u n t i l March
31, 1947> although the l a s t inducti SMI sere maae in October of
1946. Registration for induction, however, c atinued up u n t i l
the \ 91 Ml nil liffl of Selective Service, laialhin^ functio;:i£ of
the Selective Service SysteiL were transferred to the Office of
Selective Service hecords. On June 19, 1943 the Selective
Service Act of 1948 «as passed wnich re-establisned the Selective
Service System,
Houa in.-, arid Kent
fthen commercial and iiidusurial building started t o
expand rapidly at tae expense of residential const ruction after
the cancellation of urder L-41 on October 15, 1945 the Office
of the Housing Expediter *.as created on December 12, 1945 t o
encourage nousin^ for veterans, iilson I , *yatt, tne riousiag
Ixpedi'.ar, aniiounced his progr*B in February 1946. His program
set a goal o£ k.7 miilion nous ing s t a r t s in 1946 and 1947. To
meet the goal, the program called for the reinstitution of
uoverrunent control of building, p r i o r i t i e s assistance, alloc^ti >u
of materials, easier financing, sad prtBilT payments to stimulate
production oi' building iuateria,.o and to encourage develop-ent of
new mat r i a l s .
in ^arcn of 1946 t h i s program was implemented bj the
issuance of Veterans housing ^rogr..ia u rder I oy CPA ^hich forbade,
without a specific priority, the beginning of construct ion or
repair work except for tdj^or repairs. P r i o r i t i e s were givoa t o
veterans 1 housing uriCier #10,000 and rental units with ..^xiiaum
rent of 460 a month. I t also provided for b#lp for tiie program
tr.rough allocation of materials find tne use of p r i o r i t i e s .
During trie ye^r i t y*&^ found necessary tc r 'luce s t r i c t e r
l i m i t a t i o n * on'nonresidentiai. cooatructlon in order t o provide
sufficient building aeterlala for r e s i d e n t i a l c o n s t r u c t ! . n . On
May 31> 1946 an order reduced the volume of ooareeldefitlal
construction avthorisatiaDa t o i49 .^ilxion *ees\i.y fraaj I
m i l l i o n . By August <~uthori£«tions l o r nonresider.ticJL
lowered t o $35 million weekly•
Trie iyatt pro><r*aB sas sharply c u r t a i l e d in December
I946 *:hsn Creadon vtas appointed expediter. Oantrols were relaxed
P r i o r i t i e s fcr new conttrueiicA were abolished and « systen, of
permits efes put Lrtto e f f e c t . Monveterims mmr* pentiittea t o
b u i l d , d.c.1© _vric© LXmitati-Jixt
u:-;ve r«K>T9d &&d new iioiises were
liiiiited t o 1 ( 500 squ&T* feet La floor area. Kent c e i l i n g s on
new boosing *er© incre-eed to an average of #i^> acnthij per
u n i t . Authorized VMidji t o t a l value of nonrsi.idQr»tial construct i o n %*.& ii;cre,.,;ed t o 50 million dollar*», a 15 • i l l i o n dollar
ij.cr3b.ts over tne _::revi....c- mefely
On ^ p r i l 4., 1>47 OPi* eoctrols ^e e tr«&6f«rrftd t o tne
Office of th« tioueing Expediter. By Juno 1, i'M7 tne permit
been Abolished sad cr«iuium pftyaanta bud IHMB a i a Rostrictiona on nunrei»idefjti&l buiiaiiig h&a been
relaxed ana alloc<iti.no of Bftttrifcl* sert iiftiited to t fe«r i t * , . s .
Tne Houiiiiib 6nd ^eiit Act p&.r,3ed on June jO, i.947 removed
a l l controls tx&ept for coi^truction of awistwMSta tad r e c r e a t i IQ and
^idy payaanta vert dlsccotlnued*
3 ol 1947> puMd July <c?> 1947j
abolished the r a t i o n a l Hooaing Ag«ac> whiCti had been in existence
aince February *t7> *v}4^ *ad transfer red i t s fonotlofui to a new
overal-, bowkiBg a^aacy, tn.e Housia& and Boa*
so Inftladat the iioa>e Lo^ii ^iiiik ^o;»rd, tn© Federal
t i o n , uiia t a a ^uclic housing *dal&iatra&loa« In March
194B t:ie ruaairiiiijf atlaox coiitrolb over eocuitraction .1
reereatioo end ant eft, ftlnaent f a o l l i t i e a *er
Kent controls were est&bliahed uoder tne
Price Control ivct of 1942« the Uouain^ ftant **ct of 1947
voluntary rent iBCraAAea u^ t o 15 per cent providing • le^oe
•ma signed providing no further increase u o t l l Decaaher 31* 1948.
Beoft controls on aev fcmildlngf w&r© aballataeda The Hou^lxig and
Rent Aet of 1943 extended rent controls for another year, pormitt ng
* 15 ptr cent Increase i f lease itae algned to run trn'ough Paeeabar
1949* Thar© can be no pyramiding oi 15 par cant inere^aea*
-6Financjo.1
Tcx
on business were reciuceo, cnieily through elimination
of t >e excess profits Lsvy, and t&xss on lndiTidual ineosMNi were
lowered effective ^-. of tne bsgginlog f I'
kargin requirements for the porch*** of f
securities and a ort soles wsort increased to 100 per cent
effective Janaary ktt 194-6. On February 1, 1947 •Murgifl require:;,oi:ts both ; or purchases of registered securities and snort
S4&0S MOM reduced froA lOu per cent to 75 PQr cent.
Kegulation ft, rfifttlng to conauser credit, MM amended
on three occi^si ris during 1946. ^he f i r s t UMQdMOt^ effective
July 5, 1946, Mtfto trie rvgnlfltioB appiicabie to MJLM of listed
a r t i c l e s in • principal aruount of | l , 5 0 0 or less (there had pre
viously been no dollar l i a i t Kltii rasuect to •>!»»); i t eliixd
a t t i c ventilciti.1-^ fana and automobila t i r ^ s , batterl*a and acceesories frois tna l i s t of a r t i c l e s , and aad« certain technical cticin^es.
Tae second ameiidruerit, 3ffective Septe bmv 3> 1946, ch*ng*& tna regulation in t«Q respect3\ the regulation KM aade applic^i^le to nil
riMl ill—I credits up to ^ , 0 0 0 instead of only those v.p to *l,>00|
cvnd the maximum BPAturltj for instalment loans not connect&d with
tne parch*ft0 of '..isted a r t i c l e s Ma reduced from 18 aootha to 15 »onth».
The rcgolj&i n Ms extensively revised eflective Pscinbw 1,
194-6. Tne principal changes ns4s by tbs rsvlsloo were to confine i t
t o inst&lJBSQt c r e d i t (by slljd&Atittg t h e p r o v i o i ^.s r e i i i t i u g t o cn&rge
accounts sad single-payiseiit Io4ns) and to center i t on purchases of
major durab e goods (oy e l i a i n a t i i ^ sanj of tae a r t i c l e s , Including
•11 articles priced at loss than $50, ftaloo had prerioualy oean isted
in the regulation).
Regulcitlon fe" ceased to be operative after November 1, Iv47>
in accordance with a resolution of Congrsss approved 3B *mgui>t 8, 1947.
feaerc.i tsaoss on itiuiviaual lncooss ••rs agadQ i*educea,
effective Jcjiu^ry I, 1948.
@FedFRASER