How Black Is Our Market?

1

THERE was a time when Americans used to look down on foreigners for supporting a society in which the impossible could usually be obtained with a large enough bribe. Now we are rapidly evolving just such a system for ourselves. Call it a tip, gift, service charge, or what you will, a bribe will get you a steak in a restaurant, a lower berth on a train, tickets to the theater, a white shirt, a room in a hotel, or a new vacuum cleaner. If you make your generous intentions apparent enough, it does not matter how many others are waiting in line ahead of you.

Daily the necessity becomes more urgent to “ know someone” to obtain scarce items, and a bottle of liquor slipped into the right hands makes the difference between butter and no butter, the first chance on an apartment vacancy and no chance at all. A dozen rackets have sprung up wherever a potential shortage of goods or services has been discovered. Distrust and avarice, nurtured by wartime shortages, have produced a “gyp or be gypped” philosophy.

Our so-called black-market operations consist mainly of out-and-out profiteering on the part of thousands of persons, from big industrialists to hotel porters, who quickly took advantage of the fact that consumer goods and services were relatively scarce in comparison with demand and purchasing power. Criminal racketeers of the gangster variety have relatively little place in the wholesale chiseling now going on. They do not control our slaughterhouses, lumber mills, textile centers, and automobile agencies, nor do they have any interest in our retail stores and railroads. Current racketeering is largely in the hands of men and women with whom we have always done business. Instead of the strong-arm activities of a criminal element, we endure the underhanded conspiracies of cutthroat meat packers, rental agents, railroad ticket agents, and a motley arrgy of fellow opportunists.

No true comparison can be drawn between our black marketeers and the bootleggers of Prohibition days. The making and selling of illegal beverages in the 1920’s was mainly an underworld operation, while the bulk of present-day racketeering involves name brands of consumer goods which are made in nationally advertised factories and sold through time-honored channels. The underworld mobster is a negligible factor in the modern picture.

Professional racketeers were active during the war in the counterfeiting of meat, gasoline, and sugar stamps. They are still making and selling sugar stamps. They have been involved in small-time bootlegging of meat to restaurants and night clubs, and they have financed certain aspects of the textile black market. Two gangs have taken over largescale used-car operations. One of these, funneling illegal sales from Detroit to six Southern and Southwestern states, has already been broken up, and the other will be shortly. Such in brief are the activities of the criminal element in our black market.

The black marketeer in the United States is the grocer who lets us have butter in return for special favors, the office girl who gets us nylons for our wives at a “slight” extra charge, and the automobile dealer who puts our names at the top of the list for new cars but does not give us the full allowance on our trade-in. The American black marketeer is anyone who exploits his possession of scarce commodities to reap unwarranted cash dividends, and the sooner we recognize him for what he is, the sooner we can wipe out illegal trading, tie-in sales, preferential service, and under-the-counter hoarding.

Our failure to recognize the black market as the gouging of the public by formerly reputable business concerns has been reflected in the leniency of our courts toward price ceiling violators and in the reluctance of our district attorneys to prosecute known illegal traders. The courts have become tougher in recent months, especially as they have been confronted by the reappearance of violators whom they let off lightly the first time, and prosecutors have been more cooperative; but the OPA, which cannot handle its own criminal cases, still encounters both public and official indifference, plus Congressional interference. A typical example in recent months involved a Georgia meat slaughterer who informed his retail customers that they could continue to buy from him only on the condition that they kick in four cents a pound on the side.

The Georgia slaughterer sold his meat on the books at ceiling prices, but he collected several thousand dollars a week in excess, undeclared profits. On the affidavits of half a dozen of his victims, he was found guilty of price violations, convicted, and fined $2000, which was only a fraction of his take. On the ground that he had violated his agreement with the government, the Reconstruction Finance Corporation withheld $26,000 in subsidies which had been going to the slaughterer to make it possible for him to keep prices down and still make a reasonable profit. As soon as this occurred, the slaughterer went to his Congressman, who blasted the OPA for picking on a highly respectable citizen who had been doing business in Georgia for thirty years without reproach. The Congressman in this case does not appreciate that the black market, which he wants wiped out, consists of men like his precious slaughterer.

2

THE most vicious and persistent type of blackmarket operation at the consumer level involves tie-in sales and cash-on-the-side deals. In nearly every instance the transaction is an outright attempt to gouge a needy purchaser, because the seller could make a reasonable profit legally.

Scores of greed-inspired tie-in sales have been reported to the Office of Price Administration; a plumber in Akron, Ohio, was happy to locate a truck he needed and at the right OPA ceiling price, $1000. His jubilation faded, however, when he found that he also had to buy the owner’s cat, which slept on the truck. The cat cost $500.

A fruit and vegetable dealer in Detroit felt lucky to get from his wholesaler a bag of scarce onions for his customers — until he learned that he had to buy five crates of rotten lettuce to get his onions.

A housewife in Springfield, Massachusetts, seeing plenty of margarine in her grocer’s refrigerator, asked for a pound. “That will be 26 cents,” said her grocer, “plus 49 cents for this lovely plastic margarine molder. We only sell them together.”

Probably the tie-in sales that hurt the most, because they gouge people with virtually no bargaining power, are those concerned with the renting of rooms, apartments, and houses. A homeless veteran in Los Angeles, upon being told that a sunny furnished room was only $6 a week, said quickly, “Fine, I’ll take it.” His enthusiasm cooled when the landlady added, “And there’ll be $9 extra each week for rent of the garden out back.” The OPA found the garden to be an alley full of refuse.

The most common dodge is the must-buy-furniture requirement. A prospective tenant in Chicago, to take a somewhat extreme example, found a sixroom apartment which he could rent for its proper OPA ceiling of $75 a month. But he was informed that there was one slight detail which had to be arranged before he could sign the lease — the furniture had to be purchased for $15,000. A landlady in Norfolk, showing two Navy officers a moderately priced apartment, announced that to get the apartment, the officers would first have to buy her paintings, a bargain at $300 each. Other forced sales concern kitchen furnishings, bathroom fixtures, supposedly rare plants, and the ubiquitous cat.

Not all the furniture and furnishings sold by landlords represent illegal transactions. In legitimate cases, the OPA does authorize the sale of furniture at ceiling prices to tenants, in conjunction with the renting of an apartment or dwelling. But unless a landlord can show written proof of having been granted the OPA’s specific permission to sell furniture, a forced purchase of any type of household furnishings is a tie-in agreement and a clear violation of rent control. The purchaser may bring suit through the OPA and collect three times the amount of money illegally taken from him.

A second tie-in trick of the landlord is the requirement that tenants rent or buy other property to get the desired apartment or house. The owner of an apartment house in Connecticut recently asked each of his tenants for $30 extra a month, above their OPA rent ceilings, as payments toward the purchase of some building lots which OPA appraisers found were swamp lots worth at most $50 apiece. The owner was convicted and fined.

There are many other such cases. A government worker in Arlington, Virginia, renting a small cottage, was compelled to pay $25 a month extra to rent the pocket-sized yard which bordered the house. A schoolteacher in Boston, trying to find a home for herself and for her husband, due back shortly from the Pacific, was asked to rent a vegetable garden plot before she could lease a certain house. The vegetable garden, when she asked to see it, turned out to be a city dump.

Forcing tenants to pay for mythical services is a third variation of the tie-in sale in the rental business. A Federal grand jury in Michigan recently returned indictments against an apartment house owner and caretaker for overcharging twenty tenants a total of $3000, which included not only above-ceiling rental rates but also the extraction of $2.50 a month from each tenant for linen service which was never provided. Charges for nonexistent maid service, telephone service, and even baby-sitting service have been uncovered by the OPA or reported by harassed tenants.

Other rent violations include non-registration of rental rates and subsequent increases; the requirement that new tenants make security deposits and bonus payments; and the gradual elimination of services for which fees have been added to the rent. Perhaps the newest racket was discovered the hard way by a homeless reporter in Washington. He was given the opportunity to rent a small apartment on the guarantee that he would spend $600 on improvements during the coming year. To clean out these abuses, the OPA urges tenants and honest landlords alike to report all evidence of rent-control violations to their local OPA rent office for enforcement action. No tenant can be evicted for refusing to make illegal tie-in payments.

Tie-in sales have been noticeable in retail trade. A prominent hosiery company which sells chiefly through door-to-door salesmen was offering nylon stockings to its customers early this year — provided that the customer placed a ten-dollar order for other goods. In their complaints to the OPA, housewives reported that the salesmen were extremely blunt about their proposition. “How would you like to buy a pair of nylons?” was the opening sentence of the sales talk. After receiving the expected affirmative answer, the salesman then said, “All you have to do is buy ten dollars’ worth of other merchandise, and I’ll sell you a pair.”

A Detroit store — the same thing has happened in other cities — was also found guilty of using nylons as bait to increase sales of other women’s wear. This particular store announced that any woman buying a coat, suit, or dress for twenty dollars would be allowed to purchase nylon stockings. The management’s intent was obvious. Every customer should realize that any such tie-in arrangement is specifically outlawed under price-control regulations and that the OPA will take appropriate action against any individual or firm attempting to violate the act.

Avaricious wholesalers and jobbers often force grocers and dealers to take quantities of unwanted or worthless merchandise in order to stock a few special items. When the wholesaler puts an illegal squeeze on the retailer, the local merchant has these alternatives: to forgo handling fast-selling items; to pass the tie-in combination on to the consumer; to write off the unwanted or worthless articles as a complete loss; or to charge the consumer above-ceiling prices for the scarce commodity.

Besides outright cash-on-the-side deals, small-time black-market operations are greased with fixed bets and phony card games. A slaughterer goes to a farmer and says, “I’ll bet you $500 you won’t sell me a hundred head of cattle at ceiling prices.” The farmer wins the bet. Or the owner of a lumber mill will say to a prospective buyer, “Sure, I’ll let you have 5000 board feet at the ceiling price. But why don’t you bet $1000 I can’t jump over that crack in the floor?” In the prearranged card games, held before completion of a sale, the prospective buyer loses anywhere from $100 to $5000 to the man with whom he wants to do business, often in a single hand of poker or one cut of the cards.

Any such trick means that the seller gets more for his product than appears in his invoices, but OPA enforcement officers have a hard time proving it. The buyer rarely complains, unless the racket works too great a hardship on him, because he can subtract a part of his pseudo-gambling losses from his income tax, and the rest he can pass along to his own customers. Although the OPA has experienced setbacks in the courts through penalties too light to fit the crimes, the Collector of Internal Revenue, following at a more leisurely pace, also has a marked interest in dealers who are banking more money than they are supposed to be making.

The big-time black marketeer corners his sources of supply through much more subtle means than trumped-up bets and card games. Instead of slipping extra cash to a cattleman, the rich slaughterer may rent a small barn or feedbin from him for thousands of dollars a month — on the condition, of course, that the cattleman will sell only to him. Or a national liquor distributor may engineer a fake purchase of one or more small distilleries. The distributor does not buy the property outright, but gives the owner large sums of cash for a one-year option to buy. It is understood at the outset that the option never will be taken up, and that, as a consequence, the distiller can pocket the cash advance.

The OPA is certain that fake sales, options, and rentals are today netting as high as $100,000 in a single operation for the owners of small slaughterhouses, distilleries, grain elevators, lumber mills, and small manufacturing plants of all kinds. A case currently on its agenda concerns one of our largest corn products companies. The company has been offering this bargain to the owners of grain elevators: “We will buy all your grain today at ceiling prices and will pay rent for your empty elevator for the rest of the year!” It is obvious that this practice either stops or makes much more costly the normal flow of grain to food-processing plants and to the producers of cattle, hogs, and poultry in this country and abroad.

3

IN MANY areas, the forced tie-in sale between wholesaler and retailer is the black market in meat. Butchers are compelled to overstock their refrigerators and shelves with brains, pigs’ feet, beef extracts, and other unpopular meat specialties in order to acquire a few good cuts of beef and lamb. Often the hapless butcher is stuck with pounds of inedible slaughterhouse trimmings, which are fit for nothing except resale to a renderer of fat, at a great loss. Rather than raise a fuss and be black-listed by meat wholesalers, the butchers too often try to recoup their losses through devious selling tricks. While the majority remain honest, an indeterminable number sell choice meats only to those customers who tip them generously, or who don’t question prices, or who don’t watch while the meat is being weighed.

Tie-in sales of meat products have taken a fancy turn in recent months. One slaughterer told his retailers that he would go out of business unless they bought stock in a “cooperative” he was organizing. To continue to do business with him, each retailer was hooked for substantial cash contributions, and the money was used to bid illegal prices for live cattle. The capital of the bogus cooperative kept running out, necessitating the sale of more shares to the retailers. An OPA investigation revealed that the retailers in the long run were paying from 100 to 200 per cent more than the ceiling price for their meat. Taken to court, the case resulted in an injunction against the slaughterer and a $100,000 damage suit against the phony cooperative.

In another case, retail butchers bought “stock” in slaughterers’ firms, and the additional capital was employed to purchase livestock at fantastically high prices. The butcher obtained his share of the meat at rates which would seem beyond all reason, but he sold it to knowing patrons who were willing to go as high as $10 for a pound of sirloin steak.

Still another packing company told its retail butchers that they would have to lease their premises to the company and, in effect, make themselves employees of the company, rather than customers. The retailers were to get all the revenue from their own stores, except “administrative plus 10 per cent.” Although the accounting processes were complicated, involving phony salaries to the retailers and a percentage of profits, the net effect was simply that the retailers had to pay 10 per cent over the ceiling price for every pound of meat they bought. And so did their customers. The OPA secured a $20,000 damage settlement and a judgment against the packing house which restrained further violation.

The meat situation in this country is typical of the American black market in general. The major portion of the racketeering is not being done by racketeers who have moved into the business, but by wellestablished members of the industry itself. The uninitiated gangster would make little headway in competition with the black-market packer. The honest meat packer and the conscientious butcher are equally hard pressed to stay in business. The above-ceiling operators can get more meat because they are willing to pay cattlemen terrific amounts of “black” cash for it. As the meat passes through regular channels, the slaughterer, wholesaler, and retailer all reap their extra dividends and increase the cost to the final consumer.

Spokesmen for the meat industry have utilized the popular conception of a black market as a red herring to draw attention away from the unscrupulous operators in their own ranks. They have wailed, “Don’t pester us about tie-in sales. Go after the black market, which has all the meat.” Extremists among them have maintained that the mythical black market has bought up all the livestock, leaving only 2 per cent of the normal supply for the honest packers. Yet United States Department of Agriculture reports show that for the entire year of 1945 more cattle were killed in federally inspected slaughterhouses than in 1944. Of all cattle killed during 1944, 72.1 per cent were slaughtered in federally inspected houses, and the percentage for 1945 was 71.7, a drop of only four tenths of one per cent. This means that the bootleg slaughterers, about whom the meat industry has raised such a hue and cry, have to confine their activities to less than 30 per cent of the livestock being slaughtered.

The bootleg slaughterhouses, while they multiplied by the hundreds when controls were lifted, actually handle only a fraction of that 30 per cent supply and are the least of the OPA’s worries. We have always had in this country a number of farmers and smalltime slaughterers who have cut up meat without benefit of federal inspection and sold it to neighbors or consumed it themselves. But while this practice has increased somewhat, it represents only a small percentage of the black market. When slaughter controls are operating, more than 70 per cent of the meat is always in the hands of the established industry, and therein lies the black market.

We want to save the honest meat packers and butchers who are trying to treat customers fairly. We have plenty of meat in this country. Whereas the average yearly meat consumption in the period 1935-1939 was 120 pounds per person, today there are 165 pounds a year available for civilian consumption per person. But the honest trading in meat is being restrained by unfair and often illegal competitive practices, and the consumer frequently pays unnecessarily high prices. While many butchers are taking advantage of the public by charging too much for too little, the plain fact cannot be disregarded that the fault very often lies not with the butcher but with the slaughterer and wholesaler.

4

THE black market in used cars is not so extensive as rumor would have it, although approximately a million cars a year, one fourth of the total annual turnover, are sold at above-ceiling prices, with overcharges ranging from $100 to $400. Whereas usedcar lots have sprung up throughout the country, most of the new business is being done by men who have been in the automobile game for many years. The bulk of the new lots are operated by former automobile salesmen who lost their agency positions when the production of new automobiles was stopped in 1941. Many of them are shrewd traders who thrive without violating price ceilings.

The unscrupulous used-car dealers find a dozen ways to cheat the unknowing buyer. The most common violations are side payments of cash, and the sale, at a warranted price, of a car which is not in good operating condition. Other gouging tactics are: not allowing reasonable value on a trade-in, requiring a trade-in as a condition of sale, and not making necessary repairs to put a warranted car in good operating condition. Returns from questionnaires sent out to persons who purchased used cars in St. Louis and Oklahoma City reveal that from 35 to 50 per cent of them paid more than the legal price for their purchases.

The new-car dealer is in an excellent position to make easy money without detection. Most people getting new cars today are preferred customers; and being on friendly terms with their dealers, they hesitate to complain about being held up for extra cash to complete a sale. The price ceilings on new cars are established by the manufacturers and the OPA at levels high enough to assure the dealer of a good profit. Yet cases have been reported in which dealers have sold new cars at ceiling prices but have accepted as additional side payments such “gifts” as a $2000 city lot, a $500 diamond ring, and numerous cases of liquor.

The purchaser of a new car may not realize that he is being cheated when the transaction involves the allowance to be made for his used car. The reasonable value on automobile trade-ins has been established by the OPA, and the prospective buyer of the new car should check the price lists before completing a trade-in proposition. When a purchaser pays $1000 for a new car but receives only $100 on a trade-in valued at $400, he has actually paid $1300 for his new car. The price violation on the part of the dealer is as willful as though he had sold the new car outright for $300 above ceiling.

The black market in lumber was of no great consequence until V-J Day, but with the launching of our post-war building program, the profiteering has begun in earnest. The newcomers in the field are the truckers who buy from a mill and sell to the highest bidder, either a distribution yard or a contractor. They operate mainly in the Southern producing areas, since trucking out of the Northwest is hampered by mountains. In some cases the truckers are men who formerly worked for distribution yards and know the business. They haul directly from the mills to their former employers’ customers. In other cases, however, they are itinerant drivers who haul blackmarket lumber into agricultural areas, sell their load, and return to the lumber-producing area with blackmarket farm produce.

The remainder of the black market may be traced to regular businessmen who employ false invoices to cover up over-ceiling prices. The most common trick is upgrading or misrepresenting the quality of the lumber being sold. It may appear from the invoice that a sale was legal, whereas actually a poor grade of lumber was purchased at the ceiling price of more expensive material. Because of this, many new houses are being built of either green or markedly inferior timber. For example, one lumber retailer reports that green lumber in his area is being sold by mills at $60 per 1000 feet. The distributors, who usually allow lumber to season properly, are being by-passed by contractors who buy directly from the mills. As a consequence, the green lumber costs the eventual home owner from $80 to $90 per thousand feet, or at least as much as high-grade timber.

5

THE possibilities for black-market operations depend largely on the nature of an industry. In a closely organized industry, like steel or tires or drugs, there has been very little violation of price controls. In a diversified, loosely connected industry, illegal prices multiply as goods pass from producer to jobber to wholesaler to retailer to the nearly defenseless public, which shoulders the bills.

Next to food, this is particularly true of the textile and wearing apparel industries. Between the manufacturer of fabrics and the buyer of a dress there exists a horde of essential middlemen, including converters, dyers, jobbers, wholesalers, retailers, and an untold number of persons who supply buttons, belts, and trimmings.

The use of fictitious invoices by dishonest jobbers and manufacturers became a racket in the textile and apparel industries, after the OPA had been particularly successful in breaking up cash-on-the-side transactions by tracing marked money. The manufacturers had to have some evidence of their expenditures in order to compute their taxes and fill out their OPA forms. Cash on the side was a “business expense” which they could not prove without papers.

So now the racket works in this way: a black-market textile jobber sells to a garment manufacturer at above-ceiling prices. Instead of putting the manufacturer’s name down on his records, the jobber makes out an invoice to a fictitious buyer. Instead of paying cash, the manufacturer makes out a check to the fictitious name on the invoice. The jobber cashes the check through a professional check casher who has a cut in the game. The check is cashed with no questions asked, providing the manufacturer’s credit is good. As a result no record exists that the manufacturer bought from the jobber. Since the invoices are easily rigged, investigators cannot discover whether the sale involved satin at the legal price of $3 a yard, or merely rayon that should have sold for $1.10 but was actually sold at $3.

Seeing the huge sums to be made in the textile black market (one pair of scoundrels cleaned up more than $1,500,000 in six months), hardened racketeers with criminal records have moved into the field in the New York area within the year. The criminal rings finance cash transactions with mills, set up dummy office space, hire brokers and runners, and underwrite their phony check cashers. The check cashers often have to pass out hundreds of thousands of dollars a day in cashing checks made out to fictitious persons. Current investigations are uncovering oldline criminals who have brought back Prohibition days with night clubs set up to provide a blind for their operations and to furnish a ready spot to arrange pay-offs and get rid of hot money. The profiteers were so blatant in one instance that they used the name of the head of the New York OPA enforcement staff as their fictitious buyer.

The largest illegal inflation of clothing prices results from violations at the manufacturing level and from violations in the textile production fields. The black market depends basically upon the fact that manufacturers of clothing operate on a cost-plus basis and therefore must pass on the cost of their illegal textile purchases to the consumer. Cotton and rayons are the principal goods being black-marketed, and the violations usually begin with above-ceiling sales of these goods to manufacturers or jobbers who in turn pass the additional costs, plus heavy personal dividends, along to the consumer.

With no holds barred, the wily garment manufacturers fight to get a lion’s share of available fabrics. Often they force the retailers to compound their violations or get out of business. The main sources of black-market goods were established during the war, when no priorities were given to the manufacturers of nonessential items. The most prevalent type of wartime black marketeer was the manufacturer who had a legitimate priority for textile materials, but who diverted a portion of his supplies at high prices to manufacturers without priorities. The willful diverters of priority supplies included bandage makers, hospital supply firms, and the manufacturers of bullet powder bags and shoe linings.

To cite a few cases of willful diversion for personal profit: —

The manager of a large concern which manufactured bandages and adhesive tape was found guilty of selling 627,281 yards of high-priority bandage material to manufacturers of doll dresses, curtains, and other nonessential items. The material involved was a low grade of cheesecloth, normally worth from 6 to 10 cents a yard, which he sold through a broker at 30 cents a yard. He was sentenced to six months in jail and fined $7500. The fine was later rescinded when it was discovered that he was without funds.

A retired doctor who invented a new type of bandage was given a top priority to obtain a high-grade cheesecloth for Army bandages. By using a sob story about “bandages for our boys overseas,” the doctor talked textile mills into selling him thousands of yards of material which he did not need for his legitimate business. He sold his surplus, at double its value, to manufacturers of infants’ wear, handkerchiefs, and bed linen. With his profits he bought a hotel in Florida and other real estate. The OPA caught him through a tip from a girl who worked in the office of one of his customers. The girl had a fiance overseas and was opposed to black-market dealings. The doctor received a $100,000 fine and a three-year jail sentence.

Another black marketeer, whose case has not yet been taken to court, is known by the OPA to have started with $500 in capital and worked it into more than a million dollars of clear profit. He was a small manufacturer who obtained a high priority to buy material for bullet powder bags. Because he had authority to use any kind of high-grade fabric in his manufacturing process, he is believed to have obtained up to 20,000,000 yards of satin, rayon, and cotton. Working with a dozen or more conspirators, he sold a large portion of this material at high prices to thirty or forty textile jobbers.

A nationally advertised brand of cotton slips has this background. The manufacturer paid 55 cents a yard in the black market for a cheap grade of cotton lawn which was worth only 22 1/2 cents a yard and was suitable only for 10-cent handkerchiefs. The transaction was made through the use of phony invoices and a cooperative check casher. Despite the sleazy nature of the slips, 3000 dozen of them were retailed across the country for $3.98 apiece, although worth no more than $1.95.

Rayon lining for coats, a material worth 42 1/2 cents a yard, was found to be selling on the black market for $1.15 a yard; children’s dresses that retailed at $6 apiece were discovered to be worth only $3 each. A garment manufacturer reported that he was being asked to pay $1.90 a yard for material worth 75 cents, and $1.75 for another type, worth 60 cents. And so it goes — the consumer is paying millions of dollars more than pre-war prices for goods which often are far inferior to those manufactured in the days before we lost our national conscience.

The textile and garment industry is centered in the New York area, and the OPA office in Manhattan has one hundred investigators at its disposal to police illegal trading. This small force was supplemented last fall by teams from the U. S. Department of Justice and the Treasury. During 1944 and 1945, the OPA alone instituted 17,800 formal sanctions against violators of textile and apparel regulations. Concurrently, $10,000,000 was collected in fines by the U. S. Treasury as a result of these civil and criminal sanctions. A special grand jury investigation, started in December of last year, has so far brought eleven new indictments against mills, jobbers, converters, and manufacturers. With the entrance of criminal gangs into the textile picture, however, enforcement measures will have to be increased markedly to prevent further inflation and illegal trade practices.

6

SUCH stories do not make pleasant reading; but to date, the public has shown little inclination to stop supporting the thousand and one rackets which plague our society. Most of us know when we are being cheated. The office girl knows it when she pays a fellow worker $3 for a pair of nylons; the new-car owner knows it when he accepts several hundred dollars less than a fair allowance for his old automobile; the housewife knows it when she has to buy canned goods to get butter, or stale coffee to get soap chips.

But most of us are currently too indifferent to make an issue of an obvious gyp. We feel that we have to have butter, new stockings, and automobiles, so we pay tribute to the profiteers and keep our mouths shut. Too many of us feel that since we are being cheated, the only thing to do is cheat when it comes our turn to drive a hard bargain. The prevalence of bribery and corruption spreads with epidemic swiftness, debasing the fundamental aspects of our personal relations. It is only a short step from black marketeering to crime. Black marketeering generates a social environment in which the weak decide that dishonesty is the best policy. The quest for easy money has already resulted in record crime waves in most of our major cities, and a racket-minded younger generation in slum areas has become a serious postwar menace.

Unquestionably our current labor unrest stems partly from the realization of the workingman that manufacturers and retailers are getting rich illegally, at the expense of working-class consumers. Seeing a great deal of money being made with little apparent effort, the hardworking salaried employee wants his share of the false prosperity. Also catching the same fever, the veteran grows discontented with his white-collar job and starts looking for a chance to get rich faster. Either that or he grows bitter, stops working entirely, and lives on $20 a week from the government. Because of the unrest among veterans, we have, on the one hand, approximately a million veterans drawing unemployment compensation, and on the other, mounting evidence that veterans are using their high priorities to obtain surplus government property and building materials which they resell at black-market prices.

We are gambling with our futures, believing that an extra dollar here or there will have no marked effect on the purchasing power of the national dollar. In need of butter, or stockings, or a new car and having the money to pay for it, we yield to the natural tendency to say, “I don’t care particularly about the cost, if only I can get it.” This attitude, while easily justified in individual instances, leads collectively to inflation and its unavoidable aftermath, depression. I was in Germany in 1921, when inflation was just beginning to take hold there, and the average German citizen was just as indifferent as our own public about the dangers of paying too much for too little. Before I left, the German mark, once worth nearly 25 cents, was selling at eighty to the dollar, and shortly afterwards the middle class was wiped out.

Economists say that we are now in the blind spot between sound economy and runaway inflation. While the purchasing power of our dollar is still relatively high, having declined conspicuously only in proportion to the barter value of very scarce items, nothing except price control can prevent further devaluation of the dollar during our reconversion period. As long as money is more plentiful than consumer goods, we have to keep prices within reach of the average consumer. Otherwise, with the dematid far exceeding the supply, the bulk of our essential commodities would be reserved for the highest bidders and the weekly pay of most of us would be valueless in terms of purchasing power.

While the situation does not appear alarming at the moment, nothing can prevent wholesale, uncontrolled inflation so long as profiteering in essential commodities continues. Making only the most expensive articles in a manufacturing line and holding back on the inexpensive items is, if not black marketeering, willful profiteering. The concern that stops production of two-dollar shirts, which the consumers need, and ships out only twenty-dollar shirts, on which a much larger profit can be made, is just as much on strike for more money as the coal miner who puts down his pick.

A variation of the producers’ st rike has been pulled by a manufacturer of oak flooring. He has stopped making desperately needed oak flooring and is cutting his good oak wood into round seats for baby strollers. He was making a normal profit on oak flooring, but he can make more money by supplying seats to the manufacturers of baby buggies. The OPA cannot touch him, unless it can be proved that he is using his excess profits to buy more oak timber at above-ceiling prices.

7

PFRICE controls are not here to stay. We need to put a ceiling on our valuation of consumer goods only during such emergency periods as war and reconversion, when the flow of merchandise to civilian markets is inadequate to meet the demands of a monied public. As soon as our production catches up with our backlog of needs, we shall no longer have any reason to curb inflationary spending. We must realize that between 1939 and 1946 the spendable income of the American people doubled, rising from 69 billion dollars a year to the present rate of 139 billion dollars a year. This doubled income, coupled with our phenomenal production of military equipment, accounts for our current shortages. It may be another year before we can produce enough to meet our accumulated needs, and, until that time, price controls are essential to the equitable distribution of available commodities.

The value of price controls during the war has already been demonstrated. If prices had been allowed to advance during World War II at the rate in which they advanced in World War I, the direct cost of the war would have been increased by an additional 109 billion dollars. Now that the war is over, we all want to get rid of wartime controls as fast as is safely possible. But it is clear that inflationary pressures did not end on V-J Day, any more than they ended with the signing of the Armistice after World War I. Our military expenditures remain high and are receding slowly. We have heavy foreign relief obligations to meet, and the record amount of wartime savings makes people more willing to spend their money freely. For these reasons, price controls remain temporarily necessary.

Most of us, I am sure, would prefer to have price controls on a voluntary basis. Unfortunately, however, it only takes a few profiteers and free-spenders to start the inflationary spiral in any industry. To provide a legal substitute for self-discipline, we have our OP A laws, and those who persist in violating them, are undermining our national welfare. Those who buy at black-market prices are just as much contributors to the inflationary spiral as those who do the selling. In some cases the buyer may be an unwilling supporter of tie-in sales and other profiteering practices, but any industry or community by concerted action can clean out the black marketeers in its midst.

To police our 1,700,000 retail and 1,000,000 service establishments, we need many more price enforcement officers, many more aggressive district attorneys, and heavier penalties for the offenders. But most of all we need public condemnation of neighborhood profiteers. It is axiomatic that the black market, without patronage, could not exist. From producer to retailer, the whole chain of profiteering tricks is dependent upon the willingness of the consumer to absorb the extra high costs of living. Once we stop shopping at stores which we know are taking advantage of our temporary period of scarcity, even though we have to go without things within our means, the pyramidal structure of post-war profiteering will collapse. With inflation as the only other alternative, it is imperative for each of us to help keep prices in line during the present emergency. After that, the normal laws of supply and demand can take over our policing duties.