The Great Inflation from 1965 to 1984 is the climactic monetary event of the last part of the 20th century.
Truman
1952 steel strike:
The 1952 steel strike was a strike by the United Steelworkers of America (USWA) against U.S. Steel (USS) and nine other steelmakers. The strike was scheduled to begin on April 9, 1952, but US President Harry Truman nationalized the American steel industry hours before the workers walked out. The steel companies sued to regain control of their facilities. On June 2, 1952, in a landmark decision, the US Supreme Court ruled in Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1952), that the President lacked the authority to seize the steel mills.
The Steelworkers struck to win a wage increase. The strike lasted 53 days and ended on July 24, 1952 on essentially the same terms that the union had proposed four months earlier.
Eisenhower
The presidency of Dwight D. Eisenhower began at noon EST on January 20, 1953, with his inauguration as the 34th president of the United States, and ended on January 20, 1961...
There were three recessions during Eisenhower's administration—July 1953 through May 1954, August 1957 through April 1958, and April 1960 through February 1961, caused by the Federal Reserve clamping down too tight on the money supply in an effort to wring out lingering wartime inflation.
Three brief notes on inflation, from The Eisenhower Encyclopedia,
Ike saw Senator Taft give a speech in the late 1940s asking Americans to eat less to lower food prices. Liberals criticized the speech, but Ike agreed with Taft “one-hundred percent.”
Ike sawed off pieces of wood at rallies during the 1952 election to show the effect inflation had on money. (Baier, Three Days in January)
Ike ended the Korean War in July 1953. The war’s end caused the government to decrease its armament purchases. Unemployment rose from 2.6% to 6.1% by September 1954. Arthur Burns, an economic advisor, said Ike should cut taxes and expand public works programs to reverse the economic downturn. Secretary Humphrey objected. Ike sided with Burns and pushed for a $7 billion tax cut. He also signed legislation extending unemployment benefits for four million workers. This deficit spending ended the small recession in less than a year. (Gellman, The President and the Apprentice)
and two on steel:
Ike criticized Truman’s seizure of the steel mills during the 1952 Steel strike. (Ambrose, Eisenhower: Soldier and President)
Ike initially wanted to stay out of the 1959 Steel Strike, saying, “These people must solve their own problems.” He finally evoked the Taft-Hartley Act to force the workers to return to their jobs. (Gellman, The President and the Apprentice)
Steel strike of 1959:
The steel strike of 1959 was a 116-day labor union strike (July 15 – November 7, 1959) by members of the United Steelworkers of America (USWA) that idled the steel industry throughout the United States. The strike occurred over management's demand that the union give up a contract clause which limited management's ability to change the number of workers assigned to a task or to introduce new work rules or machinery which would result in reduced hours or numbers of employees. The strike's effects persuaded President Dwight D. Eisenhower to invoke the back-to-work provisions of the Taft-Hartley Act. The union sued to have the Act declared unconstitutional, but the Supreme Court upheld the law.
The union eventually retained the contract clause and won minimal wage increases.
Kennedy
Background from The Los Angeles Times:
Kennedy used a tactic his economic advisor, Walter W. Heller, called “jawboning” to urge business and labor to behave responsibly. In Kennedy’s time, that meant pay increases shouldn’t exceed productivity gains--and price hikes shouldn’t exceed increases in wages.
As Heller explained, “jawboning” used “the power of public opinion and presidential persuasion"--the bully pulpit--and Kennedy did it with words and deeds.
In his [January 11] 1962 State of the Union, Kennedy declared, “Our first line of defense against inflation is the good sense and public spirit of business and labor--keeping their total increase in wages and profits in line with productivity. There is no statistical test to guide each company and each union. But I strongly urge them--for their country’s interest and their own--to apply the test of the public interest to these transactions.”
Soon, Kennedy’s call was questioned. U.S. Steel Corp. substantially increased its prices ...
Introduction :
Kennedy, since the Inaugural Address and beyond, had been asking Americans and American business to exercise restraint to enable the United States to meet it's obligations and strengthen it's economy. The Steel Workers of America agreed to hold off their demands for higher wages if the Steel Companies, on their part, would not raise the price of steel. The workers kept their end of the bargain, the companies did not, ordering a price increase after a strike was averted. This dishonest and irresponsible act angered Kennedy, as is made clear in the [ April 11 ] speech.
Background from People's World:
The Democrat, after just a year in office, was concerned about potentially rising inflation. His administration set an informal but well-publicized target of having wage increases and price hikes match productivity increases. Meanwhile, Steelworkers’ bargaining over a contract with the nation’s steel companies was getting nowhere.
The administration intervened. It didn’t want a rerun of the 4-month steel strike of 1959 under GOP President Eisenhower. Labor Secretary Arthur Goldberg, a longtime union counsel, mediated the talks. The two sides reached agreement on March 31.
The pact, with ten of the nation’s 11 steel companies, called for an increase in fringe benefits worth 10 cents an hour in 1962, but no wage hikes that year. Then-AFL-CIO President George Meany said that in the pact, the union “settled on a wage increase figure somewhat less than the Steelworkers thought they would get.”
Kennedy praised the contract as “obviously non-inflationary” and said both the USW and the steel firms showed “industrial statesmanship of the highest order.” The agreement also implicitly said the companies would not raise prices, as that would be inflationary.
But on April 10, Roger Blough, CEO of U.S. Steel, the largest of the firms, with 25% of the market, met Kennedy in the Oval Office and told him the company was immediately raising prices by $6 a ton – and that other steel companies would follow. Six did. The 3.5% hike enraged the president. What he said in public was biting – but he was even more caustic in private.
In an April 11, 1962 press conference, Kennedy called the price hikes “a wholly unjustifiable and irresponsible defiance of the public interest.” He criticized “a tiny handful of steel executives whose pursuit of power and profit exceeds their sense of public responsibility.” The execs had “utter contempt” for the U.S., Kennedy said. ...
News Conference 30, April 11, 1962:
THE PRESIDENT: Good afternoon. I have several announcements to make.
Simultaneous and identical actions of United States Steel and other leading steel corporations, increasing steel prices by some 6 dollars a ton, constitute a wholly unjustifiable and irresponsible defiance of the public interest...
The facts of the matter are that there is no justification for an increase in the steel prices. The recent settlement between the industry and the union, which does not even take place until July 1st, was widely acknowledged to be non-inflationary, and the whole purpose and effect of this Administration's role, which both parties understood, was to achieve an agreement which would make unnecessary any increase in prices.
Steel output per man is rising so fast that labor costs per ton of steel can actually be expected to decline in the next twelve months. And in fact, the Acting Commissioner of the Bureau of Labor Statistics informed me this morning that, and I quote: "Employment costs per unit of steel output in 1961 were essentially the same as they were in 1958. " ...
Some time ago I asked each American to consider what he would do for his country and I asked the steel companies. In the last 24 hours we had their answer.
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Seems to me there was a lot of
concern about inflation in those early years, before the period called
"the Great Inflation." Much of that concern was focused on cost-push. In Part 1
of this series we saw the great focus on "cost-push" between the early
1950s and the early 1970s, and since the early 1970s its decline, with
the rise of focus on "supply shocks". In Part 2 we observed the
evolution of terminology, in new concepts and changing definitions
arising with this change in focus.
In Part 3 we have already looked at the situation before the persistent and repeated rise of inflation that began in the mid-1960s. My further plan is to look into the differences between cost-push and demand-pull inflation, and the changes in economic thought on the subject -- in particular, the focus of economic thought on "temporary" versus "sustained" cost-push.
And I want to explore the once and future concept of sustained cost-push inflation.
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