AS THE UNITED STATES heads into another experiment with wage and price guidelines, Canada is emerging from three years of mandatory controls. Since controls remain very much a topic of conversation here in Washington, despite president Carter's best efforts to rule them out of consideration, the Canadian experience invites attention. The Canadian controls were fairly successful, as these things go. From that, you can draw several conclusion.
The first conclusion is that it helps to be lucky. The controls went into effect at a moment that turned out to have been a very good one. Because of highly expansive public policy, by late 1975 the Canadian inflation rate was a roaring 11 percent. A spirit of loony recklessness had seized a large part of the labor movement, and first-year increases in wage settlements were averaging 20 percent. When the controls arrived, they put sharp limits on wage negotiations. But, by a happy coincidence, food prices were falling, and the exchange value of the Canadian dollar was rising, making imports cheaper. Working people's purchasing power rose, and the controls were off to a good start.
But as usually happens in these matters, the good luck expired before the controls. In the second year of the program, food prices began rising, the Canadian dollar fell dramatically, and higher fuel costs kept hitting consumers. Now, at the end of the three years, wage increases are running very close to the target level of 6 percent a year. But consumer prices, which were supposed to be rising no more than 4 percent a year by the time, will be up about 10 percent this year.
That leads to the second conclusion: Yes, just as George Meany and the AFL-CIO have been telling us, it's a lot easier to control wages than prices. It doesn't necessarily mean that controls were good for business profits and bad for working people. The Canadian price controls froze businessmen's margins, both gross and net, over their bitter objections. Meanwhile, the controllers argue, the wage restraints held down labor costs in a time of slack economic growth, which in turn kept employment higher than it would otherwise have been. There you have the strongest and most substantial justification of these controls - that they provided a shock absorber as government policy deliberately slowed economic growth.
But that's a rather subtle and abstruse argument. Most Canadians see only that their food bills and heating bills kept going up, controls or not. That erodes political support for the controls program, and for the government that imposed it. It's a point that deserves careful consideration by those Americans who want to try mandatory controls again here.
Over the past two years, Candian prices have been driven up by exactly the same three forces that are driving up American prices now - rising food costs, rising energy costs and a falling dollar. All three of these forces are generated by international markets. None of them is subject to any government's controls.
There you have a third conclusion: The success of any controls program, as consumers and voters see it, will depend crucially on international influencs that lie beyond that nation's reach. With that huge qualification, Canada's controls seem to have helped. The main danger there years ago was wildly increasing wages, and that pattern has been greatly changed. But wages, and union pressure, are not leading the inflation in the United States. There is not much in the Canadians' experience to induce Americans to resort to the same remedy here.