DIRECT PRICE CONTROL
THE need for price control became increasingly evident in the months just following our declaration of war. The great rise in prices from March to June, 1917, served notice upon government purchasing agents that unless some restraint were introduced there would be no upper limit to the rise in prices. Conditions were such that supplies of the goods that the government wanted could not be readily increased. In the three years preceding our entrance into the War, industrial output, under the stimulus of European demand, had increased almost to the full capacity of the existing plant. The program of government borrowing indicated that there might not be much capital available for investment in private industry. The volume of agricultural goods could not be altered much before the next crop season. Against this almost fixed supply was the insistent demand of the government and the Allies for war goods; the materials had to be secured, irrespective of the price to be paid. Moreover, the various government purchasing agents were competing against each other for the existing supply; the Allies' demands were competing with domestic military needs; and to the extent that it was buying food and clothing, the general public was waging a losing battle against these two formidable adversaries. In a free market there could be only one result of the inelastic supply and the insistent demand -- soaring prices. And these high prices would not correspond to an equal increase in costs, but would go as huge "windfall" profits to the sellers of goods needed by the military forces.
High prices were objectionable to the government for two reasons. In the first place, high prices for govern-