Inflation fuels alarm over policies

/???/for two days, maybe you should try him at home.' 'Poor fellow,' you say, 'he must have this pestiferous flu.'

For the past two months, we here on the northeastern seaboard have been suffering from what the health department defines as 'a true epidemic' of a particularly virulent form of flu – exhaustion, hacking cough, depression – lasting anywhere from three weeks to a month.

So I called my most eminent golfing buddy, a distinguished sports writer, to hear about his plans for Augusta, Georgia a month from now and the great spring festival of the game. I was told by his magazine office that he had better be called at home, but it wasn't the flu. 'I just had to get away,' he said, 'I'm sweating away at these damn taxes.' We're all sweating away at these damn taxes.

When I came to put down expenses on a business trip to London, my eyes bulged at the cost of meals, hotels – out of sight – and, just to be sure I wasn't the victim of thinking that the good old days were good old days, I fished out my diary for 1972. So I find Sunday February 27 1972, an American lawyer visiting London on my business had to be entertained at dinner. I took him to one of the two or three most expensive hotels in London because the food was renowned and he's fond of fine food. I note in my record that, with tip, this three-course Lucullan meal cost £16.80, £3.40 per person. After this figure I had put an exclamation point to point up the outrage of such extravagance.

Now, in morbid curiosity, I turned to my diary for 1979. Same restaurant, same three-course meal but this time £18.25 per person. Can you believe it? Some simpletons who stay whole and healthy by first of all not shopping or going out and secondly, by not bothering their heads with the dismal science of economics say, 'But how can it be?' In the early Seventies, inflation in England was running at 18, then 22 per cent – I think it went to 25 – and then it started to go down.

There are two things that such people forget, or don't figure out. One is that inflation is cumulative, in other words, we are now reaping the whirlwind of, say, 18 per cent in 1971 plus 15 per cent in '72 plus 20 per cent in '74 and so on, which means even if inflation did go down to nine per cent in 1978, you have to add all the percentages from the previous years. And the other fact, even more sinister, is that inflation is not a matter of simple arithmetic. It compounds itself. In other words, say something cost a pound in 1972 and in 1973 inflation was at ten per cent, well it then costs £1.10, right? Next year in '74, inflation goes to 20 per cent and that adds 20 per cent not of one hundred but of 110. Tack that on and it's easy to see why prices in England doubled in five years and are well on their way to tripling.

Well, suddenly and appallingly, inflation in this country has started to take a giant step. We used to boast with ill-concealed smugness that while Britain was having 20 per cent inflation, we were having five and six per cent. And even today American tourist agencies in London will advise visiting Americans that the simplest way to handle the exchange value is to forget the dollar and the pound sign.

Certainly, last summer, the handiest rule of thumb was to say if a shirt costs $22 in New York, it'll almost certainly cost £22 in London and this became so reliable a standard that I knew – and know – youngish couples who, for the first time in their lives, planned a quick week's charter trip to New York to go on a shopping binge – an undreamed of change from the days, from the decades, when Americans regarded Europe, London more than anywhere, as a gorgeous bargain basement. No more.

I have in front of me two newspapers, one is from San Francisco and prints a despatch from London headlined, 'The Yanks Aren't Coming'. The other is published in Fleet Street and advises or warns American tourists of the same general rule. Roughly, it says, double the American price.

Well, this may soon change. President Ford could boast of leaving office with an inflation rate of six per cent. It's now running at 18 per cent and even the Carter administration can see no end to the vicious spiral which starts with higher prices, provokes strikes for higher wages, increases the cost of producing everything which provokes higher prices, then higher wages and so on and on in a dizzy snake dance with which I should guess most of you are all too familiar. In Israel at the moment the inflation rate is, I believe, at 110 per cent. Count your blessings.

The obvious answer is wage and price controls and Senator Kennedy is going all out for it as the only sensible and humane policy, but however obvious it may be as a remedy, the American experience of it has been grim. Richard Nixon is the only president who tried it in peace time, in 1972. It stopped inflation dead in its tracks for about six months, then it was seen that the millions of dollars that had to be poured into the new bureaucracy that would make it work were being taken out of the federal treasury and could not go into such necessities as welfare, housing and so on.

So, less housing, less goods for a lot of people and more money still chasing fewer goods. So prices went up anyway. And then it was seen – a little late and a little ruefully – that the moment you have a compulsory law on such things as prices, a whole new industry arises, or rather flourishes, underground. It is the industry of the black market which draws money away by very vigorously setting up its own higher prices, taking more money away from the money available to most people to buy goods. So legitimate prices then rise.

Within the year, the noble experiment was abandoned. Senator Kennedy does not naturally, in an election year in which he wants to be president, trace the melancholy history of wage and price control, he just makes out that the administration is helpless and callous. But inflation is starting to rage so uncontrollably and the premium lending rate for the big banks to their best customers – other banks – has gone to an unprecedented 18 per cent which means that the ordinary borrower is going to pay quite a bit more, so that you now see new housing – and I mean small houses as well as blocks of flats – on which all work has stopped overnight. Very few people, it seems, young marrieds as well as big builders, can afford the new stratospheric mortgages.

All this is stimulating an atmosphere of not panic, but alarm, so new that a great many Americans are getting the fuzzy feeling that the government has lost control of the two departments which today are the main concerns of government – domestic inflation and foreign policy. So you'd think by now that President Carter would be taking a brutal beating in the presidential primaries, but he's not. He has just won a great batch of delegates to the convention in the primaries last Tuesday in Georgia, Alabama and Florida.

His victory in Florida may seem to be puzzling, to say the least, for Florida is not really a southern state in anything but geography. About 70 per cent of the Florida population was not born there, it's the Mecca or Shangri-La of retired northerners, farmers, small businessmen, just old folks and, now, of two generations of young northern people who've discovered there is no natural obligation to fight out the Arctic winters in Chicago or Vermont or Minnesota or wherever the west wind blows. Population of Florida has doubled in 15 years. It's a highly conservative population and the Republicans gave Governor Reagan a smashing victory.

Not, however, so smashing as the Democrats gave Mr Carter, for in spite of the arrival in plane loads of old conservatives from the north, there are still more registered Democrats in Florida than Republicans. And let's add that the so-called Jewish vote of Florida is Miami Beach, a pinprick in a state larger than England and crowded with Midwestern WASPS, old and new.

What we've noticed, however, in the earlier primaries is that though Democrats throughout the United States out-register Republicans by almost two to one, the ratio is shrinking. In Massachusetts, a stubbornly Democratic state, the only state in the union that didn't go for Nixon in 1972, in Massachusetts this time 40 per cent of the voters claimed to be independent. It seems there are more and more people slipping away from the old parties and waiting to see what the choice will be in November, or rather after July, when each party will have chosen its man.

At the moment, it's beginning to look like Carter versus Reagan but the moment is a long way off from midsummer. It looks, at the moment, as if Senator Kennedy were going to have a hard time maintaining his campaign and, on the other side, it looks as if Mr Reagan were racking up a load of delegates who could swamp the Republican convention.

Yet there now appears a poll whose reputation for accuracy is unmatched – the Lou Harris poll. It says that now – as Americans say 'as of now' – Mr Carter can beat Reagan handsomely but Mr Ford could beat Mr Carter. Mr Ford's hope must be that at the Republican convention there'll be enough votes for George Bush and for Congressman Anderson ,who took the whacking independent vote in Massachusetts, to pile up sufficient delegates to stall the nomination of Reagan, at which point Ford might be the irresistible compromise.

Well, we'll know more about the possibilities of Mr Anderson as a stalking horse for Ford this time next week after the crucial coming primary in Illinois, a big state that belongs neither to Carter, nor Kennedy, nor Reagan, nor Bush.

This transcript was typed from a recording of the original BBC broadcast (© BBC) and not copied from an original script. Because of the risk of mishearing, the BBC cannot vouch for its complete accuracy.

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