Price Control in Canada

Abstract

ATER more than two years of partial price control, Canada found it advisable to adopt over-all price control in the fall of I94I. To a limited degree, rentals, coal, sugar, timber, steel, milk, and other items which are either necessaries of life or essential materials of war supply, had been subject to a limited amount of control during the first two years of the war. Previous to the application of a price ceiling, control was directed toward the removing of bottlenecks of supply in order to prevent a too rapid price increase on certain commodities. However, by the summer of I94I it became apparent that more positive steps would have to be taken if fullfledged inflation was to be avoided. Prices of raw materials and wholesale commodities were increasing much more rapidly than at anytime since the declaration of war. Canada's official Cost of Living Index indicated that the rise between February and October I94I was almost as great as the increase in the previous eighteen months of the war. At this time Canada had the choice between selective price control or universal price control. Experience with piecemeal price fixing in all countries during the last war, however, indicated the desirability of an overall ceiling. Piecemeal control during the last war proved to be difficult to administer as well as unsuccessful in controlling inflation. The control of a few prices did not prevent a general price increase from taking place. Undoubtedly, price increases in uncontrolled commodities tended to be encouraged or even accelerated in anticipation of an extension of control to new areas. Rising prices of uncontrolled commodities meant rising costs of many of the factors used in the production of other commodities upon which the selling price had been fixed. These disturbances made it necessary constantly to revise the prices fixed and constantly to broaden the controlled area. The inter-relationship of all prices made it difficult to control one group while another group was left uncontrolled. Most important of all, piecemeal price fixing did not prevent inflation. Canada decided that if inflation was to be prevented during this war, selective price control would not suffice.