Trends

WAGE/PRICE CONTROLS: HOW'S THAT AGAIN?

One of the ironies of Nixon's imposition of the wage-price freeze is that on the 8th of August—just a week before the freeze was announced—Paul McCracken, chairman of the Council of Economic Advisors, had published a ringing denunciation of the whole idea. McCracken's article made a number of excellent points. General wage and price control "would be a serious threat to individual freedom," he wrote, and the controls "would be political and bureaucratic" rather than objective and analytic, as claimed by proponents. "The idea of a freeze is illusory," he continued. "Wages and prices would be in upward motion from the first day," and the pressure would continue due to contractual wage increases and the raising of inflationary expectations.

McCracken's strongest words, however, were reserved for John Kenneth Galbraith's support for the idea of permanent wage and price controls. "Believing that prices are only labels stuck on real things with no other function than to extract income from consumers," McCracken wrote, "Galbraith of course has no hesitation about 'interfering' with these prices. This view of the function of prices and how to keep them from being 'too high' was of course common for centuries until people began to study the question with some theoretical rigor and empirical evidence. It is still common among uneducated people. Galbraith's view is unusual only in being held by the president of the American Economic Association and in being described by him as new."

All of which of course now applies equally well to Mr. McCracken.

The response of most economists to the freeze has largely been one of silence. Dr. Murray Rothbard, as expected, issued a strong statement denouncing the controls. In addition, a statement terming wage and price controls "inequitable, wasteful, inefficient, and destructive of personal freedom" and calling on Nixon to rescind them was signed by 16 economists, including William R. Allen, James Buchanan, Anna J. Schwartz, and Gordon Tullock. The controls "cannot and will not prevent inflation," the statement said. "For a time controls hide the effect of inflation from the public and mislead many into believing that something useful has been done. This is an illusion…"

SOURCES:
• "Wage-Price Control: A Tempting Illusion," LOS ANGELES TIMES, 8 August 1971.
• "Is This the Death of the Free Market?" ROCKY MOUNTAIN NEWS, 22 August 1971.
• "Economists Ask President to Rescind All Controls," New York Times News Service, 25 August 1971.

GRANTING DEGREES FOR PROFIT

For over a hundred years there have been two kinds of colleges—"public" ones financed by taxes and private (nonprofit) colleges. In the face of this long tradition, an organization has now had the audacity to announce its intention to grant degrees on a profit-making basis. The upstart company is none other than Arthur D. Little, the Cambridge, Massachusetts, think tank (see REASON, June 1971, on the role of think tanks in social change). In January, ADL applied to the Massachusetts Board of Higher Education for permission to award degrees in two of the courses in management it has been giving for a number of years. The request must first clear the State Attorney General's office, to determine if any existing Massachusetts laws stand in the way. If it passes that test, then the Board's task will be merely to judge the degree-worthiness of the courses.

According to TECHNOLOGY REVIEW, "the ADL proposal is reported to have some people in the academic world a little worried." And well they might, for if ADL can make college-level education a profitable business, it will have rent the veil of the academic mystique and made it clear that providing educational services is little different in principle from any other service industry. ADL's bold plan could foreshadow a major shakeup in the higher-education market.

SOURCE:
• "Cap and Gown for ADL?" TECHNOLOGY REVIEW, February 1971, p. 64.

NEW LIGHT ON OLD AID

Although many radical critics of the corporate state have pointed out that most foreign aid money is spent in the United States and that the program serves primarily as a subsidy to many U.S. corporations, little attention has been directed at the question of whether foreign aid in fact achieves its alleged goal of helping move underdeveloped countries toward prosperity. This year, however, as the government's aid budget showed the first increase in many a year, increasing attention has been given to an analysis by Professor Harry Johnson of the University of Chicago and the London School of Economics.

In a speech at the University of Edinburgh, and more recently in a report published by the Chase Manhattan Bank, Prof. Johnson sharply criticized the World Bank's 1969 Pearson Report (an effort to revive enthusiasm for foreign aid). The report, says Johnson, was "the inevitable result of the conflict between moral conceptions and the facts of reality that arises with any charitable operation such as development aid…" There is a real question, Johnson wrote, "whether development aid has promoted or retarded development…" There is evidence that aid has encouraged countries "to pursue counterdevelopmental policies and permitted them to preserve archaic social and political structures, and so has retarded, rather than promoted modernization." The constructive potential of aid was "grossly exaggerated, and the powers of free competition to promote growth were unduly discounted."

Johnson forecasts a decline in governmental aid, displaced by "an increased dependence on the private market mechanisms of economic development, as contrasted with governmental planning and control of the development process." A major vehicle for such development will be the multinational corporation, "a powerful agency for the transmission of technological progress and the reallocation of capital resources from the rich to the poor countries…"

SOURCE:
• "Does Foreign Aid Promote Growth?" by John Cunniff, Associated Press, 23 April 1971.