The Emergency Price Control Act gave the Office of Price Administration the power to control prices of civilian goods and rents during World War II. The OPA was also given responsibility for rationing goods such as oil and sugar during the war.
As the American military buildup in the face of the threat from the Axis Powers accelerated in the spring of 1940, the United States began to face shortages of critical materials. Shortages raised difficult and politically sensitive questions concerning the proportion of the nation’s resources to reserve for civilian use and how to allocate the available supplies fairly. The problem was aggravated, because government spending on defense was placing large amounts of cash into the hands of consumers. The United States spent an estimated $288 billion to fight World War II, compared to the $9 billion annual federal budget in 1940. Disposable personal income (income after taxes) rose from $92 billion to $151 billion during the war, while the supply of civilian goods and services (measured in constant dollars) increased only from $77.6 billion to $95.4 billion. With so much money pursuing a limited supply of goods, the government became concerned with preventing runaway inflation, which could seriously harm the economy.
S.
The federal government followed a complex of strategies to keep inflation under control. Higher taxes imposed by the Revenue Act
President Franklin D. Roosevelt established OPACS by executive order on April 11, 1941. The office was given a dual responsibility: It was to prevent inflationary price increases and to stimulate provision of the necessary supply of materials and commodities required for civilian use, in such a manner as not to conflict with military defense needs. Concurrently, it was to ensure the “equitable distribution” of that supply among competing civilian demands. Roosevelt appointed as OPACS’s administrator Leon Henderson, an economist who had risen from director of the Research and Planning Division of the National Recovery Administration to become one of the most influential New Deal leaders. In 1939, Roosevelt had appointed Henderson to the Securities and Exchange Commission (SEC). An outspoken champion of competition, opponent of monopoly, and defender of consumers, Henderson was temperamentally and ideologically at odds with the business executives who were brought to Washington, D.C., to mobilize the economy for the impending war. Roosevelt aggravated the situation by his typical practice of dividing responsibility and leaving blurred the lines of authority among different officials.
Henderson perceived a duty to act as spokesman for civilian needs. He accordingly came into bitter conflict with William Signius Knudsen in the spring of 1941 over control of the priority system for the allocation of scarce materials. Knudsen, a former General Motors executive, as director-general of the Office of Production Management
A young boy is presented learning to use a rationing book in this propaganda photograph from February, 1943.
Rising prices accompanying the defense buildup shifted the focus of Henderson’s attention to the problem of inflation. The OPA lacked effective power to halt the spiral of rising prices, and the inflation rate reached 2 percent per month by the end of 1941. Although Roosevelt asked Congress in July, 1941, for prompt action on price stabilization, the lawmakers dragged their feet until after the Japanese attack on Pearl Harbor. The Emergency Price Control Act, which Roosevelt signed into law on January 30, 1942, authorized the OPA to set maximum prices and to establish rent controls in areas in which defense activity had affected rent levels. Because Henderson thought some price increases to be necessary as incentives to expand production, he delayed acting under this new authority until late April. The OPA then issued its first General Maximum Price Regulation, requiring that sellers charge no more than the highest price charged in March, 1942. This move slowed down, but failed to halt, the rise in the cost of living.
The regulation worked satisfactorily for standardized articles but did not do so for products such as clothing, for which manufacturers and sellers could hide price increases through changes in style, quality, or packaging. The biggest loophole, however, was the provision that the congressional farm bloc wrote into the Emergency Price Control Act barring the imposition of price ceilings on farm products until their prices reached 110 percent of “parity,” a level that would put product prices where farmers believed they ought to be. With most farm products thus excluded from price controls, food prices increased 11 percent during 1942.
The conflict over allocation of resources between military and civilian needs resurfaced in the so-called “feasibility” dispute that reached its climax in the fall of 1942. Henderson took the lead in attacking the armed services for exaggerating their supply needs at the expense of the civilian economy. The immediate dispute was resolved by a compromise, whereby the military program was cut back through extending scheduled delivery dates farther into the future. The military won the larger battle. In October, 1942, Roosevelt established the Office of Economic Stabilization
Because of his political skills, his contacts in Congress, and Roosevelt’s confidence, Byrnes was able to expand his control over all matters relating to the economy. That control was formalized by the creation in May, 1943, of the new Office of War Mobilization
The OPA was more successful in maintaining price ceilings on consumer goods. Faced with a continued rise in the cost of living resulting from exemption of most farm products from the Emergency Maximum Price Regulation, Roosevelt in September, 1942, warned Congress that unless the lawmakers voted to rectify the situation, he would act himself on the basis of his war powers. After a bitter struggle, Congress approved the Anti-Inflation Act
By April, 1943, prices were on average 6.2 percent above the September 15 level, with food prices rising even more. The OPA came under increasing pressure from producer groups and their congressional allies to relax price controls and from labor unions for higher wages. The turning point in the battle against inflation came on April 8, 1943, when Roosevelt ordered the economic stabilization agencies to “hold the line” against further price and wage increases. He followed this order with governmental seizure of coal mines to break a miners’ strike for higher wages. The OPA simultaneously launched an aggressive campaign to roll back food prices. That campaign culminated in a 10 percent reduction in the retail prices of meat, coffee, and butter.
Along with price and rent controls, the OPA adopted a system of rationing for particularly scarce commodities. The purposes of rationing were to combat inflation by preventing a bidding war for scarce goods, to ensure equitable distribution, and to give priority to military needs by restricting consumer demand. Rationing began at the end of December, 1941, with automobile tires as the first rationed good. A severe rubber shortage had resulted from the Japanese seizure of Southeast Asia. Rationing was extended to sugar, coffee, and gasoline in 1942. Rationing was instituted in 1943 for meats, fats and oils, butter, cheese, and processed foods. Shoes were added later. At the peak of rationing, the OPA administered thirteen rationing programs. Rationed goods still represented only one-seventh of total consumer expenditures.
There were two types of rationing. One—applied, for example, to gasoline and rubber tires—involved a priority system under which different quotas were allotted on the basis of need. Equal rations for all were the rule, with few exceptions. The second type of rationing, the point system, was a scheme whereby a whole family of items (such as meats, fish, cheese, and butter) was lumped together, with each item in the family given a point value. Consumers were allotted a certain number of points per month and were free to spend those points as they wished. The OPA exercised control at the final stage of the distribution chain. Retailers would collect ration coupons or stamps from their customers and had to give them to their suppliers before they could get a new supply of the article. Administration at the consumer level was delegated to approximately fifty-six hundred local rationing boards. This arrangement had important political advantages, as the boards were made up of respected and influential members of the local community. The drawback was lack of uniformity across the country.
From the first, the OPA was a center of political infighting. As was the norm under Roosevelt, rival bureaucrats maneuvered to expand their empires. Thus, Henderson clashed with Secretary of the Interior Harold L. Ickes, the petroleum administrator, over gasoline rationing, and with War Food Administrator Chester C. Davis over food rationing. Patronage-hungry politicians strove to control appointments to OPA positions. A host of rival interests jockeyed for favored treatment. Henderson’s vocal championship of consumers against pressure groups from business, agriculture, and labor antagonized producer groups and the conservative coalition of Southern Democrats and Republicans in Congress.
In December, 1942, Henderson resigned, officially for reasons of health. He appears to have been pushed out by Roosevelt, because he had become too much of a political liability. Roosevelt replaced Henderson as OPA administrator in January, 1943, with Prentiss M. Brown, a Democratic senator from Michigan who had just been defeated for reelection partly because of his support for agricultural price controls. Brown was succeeded in October, 1943, by former advertising executive Chester Bowles. In February, 1946, New Deal lawyer and Federal Communications Commission chairman Paul Porter became the last OPA administrator.
The OPA did not work perfectly. There were numerous cases of evasion of price controls and rationing. Landlords in areas where housing was scarce, for example, often demanded an under-the-table payoff before renting an apartment. There was a large black market in such goods as coffee and soap. Because of the time and difficulties involved, the OPA rarely instituted criminal prosecutions of violators; its major enforcement tool was a court injunction to prevent further illegal sales. Mistakes in the handling of rationing were a major contributor to the OPA’s unpopularity. The introduction of rationing for sugar and coffee was accompanied by what many thought was excessively restrictive and pointless bureaucracy and regulation. Even worse, the OPA had by 1944 issued food-rationing coupons far in excess of available supplies. A survey in late fall showed that consumers had an average of 2.8 months of unused food coupons. When the temporarily successful German counterattack in the Battle of the Bulge at the end of 1944 threatened to cut supplies further, authorities canceled the unused coupons despite their previous pledge that no such action would be taken.
The OPA was largely successful in keeping consumer prices under control. Living costs had increased by almost two-thirds from 1914 to the end of World War I. In contrast, the cost of living rose only by approximately 28 percent from 1940 to the end of World War II. Most of that increase came before adoption of the Anti-Inflation Act of October, 1942. Living costs increased by less than 2 percent during the last two years of the war. Perhaps most important, most Americans enjoyed a higher standard of living at the war’s end than they had before it began.
The end of the war led to a bitter struggle over continuation of the OPA. The new president, Harry S. Truman, backed Bowles in his plan for a gradual relaxation of wartime controls over prices, wages, and scarce commodities to smooth the transition to a peacetime economy. On the day after the surrender of Japan, the OPA ended rationing of gasoline, fuel oil, and processed foods. By the end of 1945, only sugar remained under rationing.
During late 1945 and early 1946, the OPA was able to control price increases, but inflationary pressures were gaining momentum. Consumers were buying in black markets, labor unions were pushing for wage hikes, and manufacturers and farmers had joined with Republican leaders in Congress to demand an end to all controls. A battle raged through the spring of 1946 over extension of the OPA. A conservative coalition of Republicans and Southern Democrats passed through Congress in late June, 1946, a price control bill extending the OPA for one year but drastically cutting its powers and commanding it to decontrol prices “as rapidly as possible.” Instead of acquiescing, Truman vetoed the bill on June 29 and allowed price controls to expire on July 1.
Prices rose sharply, while shortages of meat, sugar, electrical appliances, housing, and automobiles continued. In late July, Congress approved a second bill extending price and rent controls for one year. Truman reluctantly accepted it, but the damage had been done. The new measure was even weaker and more confusing than the one that Truman had vetoed. Republican speakers and advertisements during the election campaign in the fall of 1946 made the confusion and failure in the price control program a major theme. One incident was particularly damaging to the Truman administration and the Democrats. When the OPA restored price ceilings on meat in August, 1946, farmers withdrew their cattle from the market to force a change in policy. While shoppers waited in vain for meat, Republicans seized on the shortage as a campaign issue. After the Republicans won control of both houses of Congress, Truman gave up the fight. He ended all wage and price controls, except those on rents, sugar, and rice, on November 9, 1946. The OPA began to wind up its affairs a month later.
-
Bowles, Chester. Promises to Keep: My Years in Public Life, 1941-1969. New York: Harper & Row, 1971. An autobiography concerning Bowles’s years of public service. Extensive account of Bowles’s struggles as OPA administrator. -
Chandler, Lester V. Inflation in the United States, 1940-1948. New York: Harper & Brothers, 1951. An analysis of the forces responsible for inflation during and following World War II. Emphasizes the role of government fiscal and monetary policies. -
Chandler, Lester V., and Donald H. Wallace, eds. Economic Mobilization and Stabilization: Selected Materials on the Economics of War and Defense. New York: Henry Holt, 1951. An anthology of materials treating problems of economic mobilization and stabilization during wartime, drawing heavily on the experience of the United States in World War II. Part 4, “Direct Stabilization Controls in Wartime,” focuses on the OPA’s price control and rationing policies. -
Harris, Seymour. Price and Related Controls in the United States. New York: McGraw-Hill, 1945. A sympathetic detailed account of OPA price and rent controls by an economist who served with the agency. -
Hughes, Jonathan, and Louis P. Cain. American Economic History. 5th ed. Reading, Mass.: Addison-Wesley, 1998. Comprehensive account of the history of the American economy and its relationship to the U.S. government. -
Lingeman, Richard R. Don’t You Know There’s a War On? The American Home Front, 1941-1945. Updated ed. New York: Nation Books, 2003. Details all aspects of the American domestic experience during World War II, from Japanese internment to rationing. -
Mansfield, Harvey C., et al. A Short History of OPA. Washington, D.C.: Office of Temporary Controls, OPA, 1948. The indispensable official history of the OPA, written by a team headed by one of the country’s leading experts in public administration. -
Polenberg, Richard. War and Society: The United States, 1941-1945. Philadelphia: J. B. Lippincott, 1972. An excellent survey of all aspects of the American home front during World War II. Includes a brief but perceptive account of the struggle for economic stabilization. -
Rockoff, Hugh. Drastic Measures: A History of Wage and Price Controls in the United States. New York: Cambridge University Press, 1984. A comprehensive history of efforts to control wages and prices. Compares the United States’ experiences in World War I, World War II, and the Korean War. -
Somers, Herman M. Presidential Agency: OWMR, the Office of War Mobilization and Reconversion. Cambridge, Mass.: Harvard University Press, 1950. An excellent account of James F. Byrnes’s coordination and direction of the wartime government management of the economy. -
U.S. Bureau of the Budget. The United States at War. Washington, D.C.: Government Printing Office, 1946. This official history is a comprehensive survey of the wartime government management of the economy.
6.6 Million Women Enter the U.S. Labor Force
Roosevelt Signs the G.I. Bill
General Agreement on Tariffs and Trade Is Signed
Eisenhower Begins the Food for Peace Program
Service Economy Emerges in the United States
Congress Passes the Consumer Credit Protection Act