With all the talk of price increases and inflation these days, it's interesting to look to how these things were handled in the past. On a previous World War Wednesday, I talked about the differences between World War I and II and the "high cost of living," as it was called at the time. A big part of keeping prices affordable during the Second World War was not only mandatory rationing (it was voluntary in WWI), but also the Office of Price Administration (OPA) was able to freeze or set prices nationally for all consumer goods. Agricultural commodities were exempted from OPA control.
Although the OPA was founded in 1941, it wasn't until 1943 that it settled on direct price control as the most effective means of regulation of consumer prices (The Oregon State Archives has a great overview of the OPA and price controls as part of an online exhibit on WWII). Although direct price control - "ceiling prices" they were called at the time - were extremely popular with the general public, retailers and especially manufacturers were constantly looking for ways around the regulations or to weaken them. The OPA used peer pressure and enlisted an army of housewives to report on those not adhering to regulations.
This propaganda poster, one of many produced by the OPA, features a well-coiffed housewife holding a can of what appear to be tomatoes (or maybe cherries) smiling at a balding grocer, who in turn points rather wryly to a posted placard reading "OPA Price Ceiling List." The text of the poster read "Let's TEAM UP to keep food prices down for the sake of America's Future."
Ceiling prices were published by the OPA and required to be posted in retail spaces, especially food, which was among the most price-controlled area of American life. Although small businesses could charge slightly higher prices than regional chains, the prices often differed by only a few cents, and were designed to help out the small businesses by giving them slightly higher profit margins. Much of the propaganda around price control and rationing both calls for cooperation between retailers and consumers, and this poster is no exception. Retailers were expected to follow regulations and consumers were expected to only patronize retailers who were following the rules.
That didn't stop a huge black market from developing, especially around meat. Despite massive quantities of meat being used to feed the armed forces and sent overseas to support the Allies, ranchers and meatpackers were unhappy with price controls and in the aftermath of the war some actively withheld meat from the market in an effort to create false scarcity and anger voters, who would oppose the price controls. By the fall of 1946, meat production had fallen by 80%. Angry voters blamed the party in power - the Democrats - rather than the ranchers and packers who were colluding to manipulate the market, and delivered a Republican win in the election of 1946 - the first since 1930.
The tension between food producers and food consumers has a long history. In the "free" market, farmers and ranchers are rewarded for low yields and production because prices go up. Getting producers to produce enough to feed people affordably while still ensuring they make a fair profit is a dilemma that plagued the early 20th century. Finally, during FDR's New Deal, government funds were used to subsidize farmers through low-interest farm loans and also direct payments to steady the supply on the market and protect farmland from the Dust Bowl. These were revoked in the 1970s under Nixon's Secretary of Agriculture Earl Butz of "get big or get out" fame. Instead, the government maintained an agricultural price floor - if the market price fell below the floor, the government would make up the difference to the farmer. So what happened? Of course prices instantly fell below the floor - because they could. Food manufacturers benefitted from purchasing commodity crops for less than they cost to produce, our modern processed food production flourished (to the detriment of our health), and taxpayers footed the bill.
In the modern era, many economists (including at NPR) have used the jump in post-war inflation as the OPA was dissolved wholesale (instead of gradually increasing prices as economists of the period recommended) as proof that the OPA was always a bad idea, doomed to failure. But the people who hated the OPA the most seemed to be the people who stood to profit the most from inflation - the manufacturers, packers, and retailers who could pad their bottom lines with price increases in the name of "scarcity."
Sound familiar? It seems to me as though the OPA, behemoth bureaucracy though it was, was more the victim of those determined to see if fail, at all costs, than a violation of the "natural order." Because although economists like to talk about scarcity driving up prices, they have very little to say about price increases that are not caused by scarcity, and even less to say about price increases on goods that people cannot afford to do without - like food and housing and healthcare.
The tension between pro-business forces who oppose regulation and pro-consumer forces who support regulation date back to the 19th century in the United States. The conflict was present in the fallout from the Panic (and subsequent 7 year Depression) of 1893, in the industrial recessions of the early 20th century, and especially in the handling of the Crash of 1929 and subsequent Great Depression. FDR's New Deal and a dramatic increase in government regulation of business and the economy helped pull us out of the Depression (wartime defense spending didn't hurt either). But the OPA caused a strong negative reaction among the pro-business, anti-regulation groups that shifted politics back toward the myth of the "free" market. But while inflation did increase by as much as 20% after the OPA was dissolved, strong postwar wages helped mitigate the effects. Whereas wages in the modern era have largely stagnated for over a decade, especially for workers on the lower end of the economic spectrum. A few economists have discussed the morality of price gouging, but should we rely on the morals of businesses in a capitalist society?
The tensions between pro- and anti-regulation forces are still at play in modern politics. After decades of deregulation, the Biden Administration has begun re-regulating or executing new orders on the environment, consumer protections, and immigration, but has yet to address the modern "high cost of living," although it is trying to reduce meat monopolies. But corporate consolidation has continued unchecked for decades, belying the "free market" and hurting consumers. It's a problem that won't be solved overnight.
As prices for housing, food, healthcare, and other essential goods continue to rise, will we return to the lessons of the Office of Price Administration? That remains to be seen. I, for one, wouldn't mind a return to the "fair price" lists published in WWI. If politicians can't stomach a return to government regulations, maybe we can at least shame food corporations into sacrificing some of their record profits to ensure Americans have enough to eat.
What do you think?
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Sarah Wassberg Johnson has an MA in Public History from the University at Albany and studies early 20th century food history.