A silver lining?
One should, and I do, feel suitably sorry for the big three US automobile makers in Detroit who expected to sell more cars than they have been selling during the last three months of 1980.
And I should, and I do, feel suitably sorry for the retail stores which report that pre-Christmas sales so far are not up to expectations.
But my sorrow over their disappointments is tempered by the thought that just possibly we are seeing the beginning of the most vital ingredient in an anti-inflation program which almost all America hopes President-elect Reagan will launch immediately after his inauguration.
The main elements of the prospective Reagan program, as sketched out already, are supposed to be just the right combination of less government spending with careful control over the money supply and selective tax cuts.
We are assured by the prospective secretary of the treasury, Donald Regan, that if the new administration can get the proper mix of these three ingredients the results will be a slowing of the inflation rate.
Well, I have no doubt that such a program could, at least in theory, check the inflation and begin a gradual if somewhat painful march back to economic stability and a sound dollar. But there is one essential factor which Mr. Reagan did not mention when he passed lightly over the inflation subject in the unveiling of Reagan cabinet selections. The psychological factor was not mentioned, and it is that factor which will make or break any anti-inflation program no matter how sound it may be in theory.
The pyschological factor is the attitude of consumers toward prices. So long as the average buyer assumes that inflation is continuing he will buy today on the assumption that prices will be higher tomorrow. And so long as he buys on that assumption he gives the merchant both an increased incentive to raise prices and a reduced incentive to resist pressure for higher wages.
But suppose that the average US citizen becomes convinced that the Reagan anti-inflation program is sound and serious and suppose also at about that same time he becomes weary of those incessantly rising prices and suspects that he is being "ripped off" every time he goes to the store for food or clothing or anything else.
Then what happens?Suddenly a lot of people hold back on their buying, and there is a buyers' strike. Once a buyers' strike gets started merchants will react in two ways. They will slow down on automatic markups, and they will be reluctant to give in to the next round of higher wage demands. That is where a sound government anti-inflation program could really begin to work.
Are there convincing signs that a buyers' strike has begun?
With automobiles the evidence is impressive. Sales during October and November have been a bitter disappointment, particularly to the Detroit makers, but also to all but one of the foreign companies selling in the US market. Volkswagen, long one of the strongest sellers in the US market, has priced itself into trouble.
Sales of its American-built Rabbits were down 26 percent in November. Its more expensive Scirocco and Dasher models were even less attractive to buyers. The only foreign company which increased its US sales during November was Honda. Foreign imports dropped from 30 percent of the US market to 24 percent.
This looks very much like a buyers' strike. The prices are just too high for the average American. Dealers tell of case after case of a prospective buyer coming in, looking at the car with interest, then looking at the sticker price, and walking out.
As for Christmas sales, it is still early. Preliminary reports are patchy. But there are reports of many a store where the extra store clerks hired to handle the rush stand around with nothing to do. Perhaps it will come with a rush in another week, but right now it looks as though there just might be a buyer's strike in retail merchandise.
Suppose that this resistance to higher prices holds right through the holidays, and suppose that the Reagan program stimulates a feeling that prices might start coming down someday. Americans could be headed toward economic stability. It is of course just a faint possibility. But it's pleasant to think that there might be a silver lining to the cloud of lagging Christmas sales.