Managers Have to Manage

The main thing to remember about the price-wage-profit crisis in which the Kennedy Administration is now floundering is that on July 5, 1935, the Congress abolished the older power of business management to manage business in the United States. That is the date of the National Labor Relations (Wagner) Act. The express purpose of this act was to give trade unions equal bargaining power with management—that is, power to block or veto managerial decisions on wages and working conditions. But though abolishing the older power of management to manage, the Congress didn’t assign managerial powers anywhere else. The result has been 27 years of continuous wage inflation powered by union monopoly and prounion government.

Private management in the United States did retain the power to manage prices. It utilized this power as it had to—to inflate prices at approximately the rate of the wage inflation and as the shortest way to meet the wage demands which the inflation imposed. But the President’s brusque intervention in the steel industry looked like formal notice that management is now to be deprived of its older power over prices. An industrial system in which management controls neither wages nor prices is like a case of cerebral palsy. It lacks essential coordination. Yet the American economy is now up against two rival systems in which price-wage coordination is still firm and industrial management still confident. In the friendly but competitive Common Market countries of western Europe and Japan private management retains its old power to manage. In the deadly hostile Communist countries state power to manage, though clumsily and wastefully exerted, is without any limitation at all.

CI

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C. P. Ives

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The main thing to remember about the price-wage-profit crisis in which the Kennedy Administration is now floundering is that on July 5, 1935, the Congress abolished the older power of business management to manage business in the United States. That is the date of the National Labor Relations (Wagner) Act. The express purpose of this act was to give trade unions equal bargaining power with management—that is, power to block or veto managerial decisions on wages and working conditions. But though abolishing the older power of management to manage, the Congress didn’t assign managerial powers anywhere else. The result has been 27 years of continuous wage inflation powered by union monopoly and prounion government.

Private management in the United States did retain the power to manage prices. It utilized this power as it had to—to inflate prices at approximately the rate of the wage inflation and as the shortest way to meet the wage demands which the inflation imposed. But the President’s brusque intervention in the steel industry looked like formal notice that management is now to be deprived of its older power over prices. An industrial system in which management controls neither wages nor prices is like a case of cerebral palsy. It lacks essential coordination. Yet the American economy is now up against two rival systems in which price-wage coordination is still firm and industrial management still confident. In the friendly but competitive Common Market countries of western Europe and Japan private management retains its old power to manage. In the deadly hostile Communist countries state power to manage, though clumsily and wastefully exerted, is without any limitation at all.