Wage Control Policy During The Korean War
On February 9, 1950, Senator Joseph McCarthy denounced the administration of President Harry S Truman for permitting known communists to remain in the employment of the United States government. The incident sparked a four-year period of anti-communist policies and attitudes which came to be known as McCarthyism. The accusations by McCarthy and others put the Truman administration on the political defensive, and led President Truman to seek ways in which he might prove he was not "soft on communism."
On June 25, 1950, North Korea invaded South Korea, touching off the Korean War. American wartime mobilization agencies, including the recently formed National Security Resources Board (NSRB), were dormant. President Truman attempted to use the NSRB as the nation's military mobilization agency. The president quadrupled the defense budget to $50 billion, and the NSRB placed controls on prices, wages and raw materials. Inflation soared and shortages in food, consumer goods and housing appeared.
On September 8, 1950, the U.S. Congress enacted the Defense Production Act. Title II of the Act permitted the president to requisition any facilities, property, equipment, supplies, component parts of raw materials needed for the national defense. Title IV of the Act gave the president the authority to impose wage and price controls in progressive steps (ranging from voluntary controls to controls only in essential industries to overall controls).
On September 9, Truman issued Executive Order 10161, which established the Economic Stabilization Agency (ESA) to coordinate and supervise wage and price controls. Utilizing the wage and price control model developed in World War II, the Truman administration created two sub-agencies within ESA. The Office of Price Stabilization (OPS) was given the power to regulate prices, while the Wage Stabilization Board (WSB) oversaw the creation of wage stabilization rules. The division of labor was specifically designed to unlink wages from prices. If prices rose automatically with wages, the inflationary spiral would continue unabated. Placing the onus solely on workers to keep wages low risked the wrath of labor, a lesson the administration had learned from the World War II experience. Delinking wages and prices leveled the playing field. Both workers and employers would now be forced to justify, independently, the wages and prices they demanded.
By October 1950, inflation had abated and shortages were easing. Although Truman had named Alan Valentine as ESA administrator and Cyrus S. Ching chairman of the WSB, the ESA and its sub-agencies were largely inactive and the president hesitated to name a director for the Office of Price Stabilization.
China entered the war on behalf of North Korea on October 19, and made fighting contact with American troops on October 25. The intervention of China in the Korean War unraveled the administration's mobilization effort. A panicked public began hoarding and the administration accelerated its rearmament plans, and the economy went into an upward inflationary spiral. By December, public support for the war had fallen significantly, and Truman and his intelligence experts expected World War III to break out by spring.
Confronted with the failure of the NSRB, an economy on the verge of collapse, and a mobilization effort which was faltering and unable to meet the needs of accelerated production plans, President Truman declared a national emergency on December 16, 1950. The declaration of an emergency was, in part, motivated by the McCarthyite attacks on the administration and Truman's desire to appear strong in the prosecution of the war. Using the powers granted to him by the Defense Production Act (which had been enacted only in September 1950), Truman created the Office of Defense Mobilization (ODM). Truman moved the ESA under ODM, and nominated Michael DiSalle as the director of OPS.
Read more about this topic: 1952 Steel Strike
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