Business: The Economy: Crisis of Confidence

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particular happening." Business, he says, would revive slowly, inflation would simmer down very gradually, and unemployment might stay uncomfortably high. It is also possible that the U.S. economy could get itself into a "stop-go" cycle such as Britain suffered through for many years. Washington would apply brakes to the economy, release them when a recession threatened, find that the business revival had set off a new burst of inflation, and slam on the brakes again.

Better Alternatives

There are, however, alternative courses of action open to the Government. Among them:

≫ Institute an income policy going farther than the one Arthur Burns suggests. Anything short of actual wage and price controls, which have usually proved to be inequitable and unworkable, might tempt businessmen and labor leaders to defy presidential wrath and increase prices and wages. But there is evidence that guidelines and "jawboning" intervention by the White House held down some prices during the Kennedy-Johnson era. Arthur Okun, a member of TIME'S board, figures that prices rose 1.7% a year between 1966 and 1968 for 15 jawboned industries, including steel, copper, autos and aluminum−but that prices jumped 6% in those industries in Nixon's first year. When Nixon made the mistake of proclaiming at the start of his presidency that he would do no jawboning, businessmen and labor leaders took his announcement as a signal to go for all the increases they could get−and they did just that. A presidential guideline on just what size wage increases would be noninflationary might give company executives a bargaining point in labor negotiations, and give union leaders a talking point in dealing with their own rebellious members.

− Attack structural rigidities in the economy. U.S. business is shot through with restrictive union practices, fair-trade laws, and indefensible subsidies to farmers, shipping men and others. All such rigidities help to drive up prices. Quotas on steel and oil imports keep out low-priced foreign materials. An act passed by Congress in 1964 orders the President to impose a quota on meat imports if they seem likely to rise 10% or more above the 1959-1963 yearly average. In order to avoid triggering the quota, foreign suppliers are refraining from shipping in as much meat as they could. That restriction on the supply of one of the most important items that U.S. consumers buy helps keep up the price. A legislative drive to repeal quotas and subsidies would be in the national interest, though it would no doubt bring shrieks from every special-interest group in the country. At very least, the Nixon Administration could reverse its steps toward further protectionism, such as its campaign to force Japan to limit textile shipments to the U.S. The Government has shaped its anti-inflationary program entirely in terms of limiting demand; increasing the supply of goods and services by breaking some of the bottlenecks in the economy is an alternative that cries out to be explored.

≫ Settle for less than total victory over inflation. The present 6% rate of inflation is intolerable, but the U.S. in the long run may have to learn to live with a somewhat higher rate than citizens have been accustomed to think of as acceptable. Members of TIME'S Board of Economists generally feel that the nation would do well to