President Bush frequently compares the war in Iraq to World War II. While giving the commencement speech at the U.S. Air Force Academy in June of last year Mr. Bush noted, “Like the Second World War, our present conflict began with a ruthless surprise attack on the United States.” Last month, while speaking at a ceremony commemorating the 60th anniversary of World War II, Mr. Bush again made comparisons between the two conflicts. He said, “As we mark this anniversary, we are again a nation at war. Once again, war came to our shores with a surprise attack that killed thousands in cold blood.”
While many Americans are dubious about these comparisons, perhaps we should take the president at his word. Maybe we are engaged in a global war. If that’s the case, then there is ample precedent for Mr. Bush to limit oil profits. Americans expect the president to do something that will lower the cost of gasoline.
Since last year gasoline prices have risen 44 percent. After Hurricane Katrina hit the Gulf Coast, the price of gasoline skyrocketed. The oil companies Citgo, Mobil, and Marathon all increased their gasoline prices by an average of 45 cents last week. The Department of Energy received over 5,000 calls in one day from consumers complaining that gasoline stations were gouging them. In Georgia, gasoline prices at some stations exceeded $6.00 per gallon. In Michigan, gasoline prices jumped almost $1.00 overnight.
Oil companies have made huge profits in recent years. Exxon Mobil has seen a 32 percent increase in its profits since 2004. Likewise, ConocoPhillips enjoyed a 56 percent increase in profits since last year. Much of the record profits are attributable to the fact that these companies bought oil reserves years ago when the prices were $10 to $25 per barrel. Oil prices are now going for upwards of $70 per barrel.
The price of gasoline, and many other items, also soared in World War II. Corporate profits more than doubled between 1939 and 1943. As a result, the federal government sought to lower prices and limit corporate profits during the war. According to Martin Hart-Landsberg, an economist at Lewis and Clark College, “Holding down prices was one of the U.S. government’s important economic achievements during World War II.” This was accomplished largely by the Office of Price Administration.
In 1941, President Roosevelt created the Office of Price Administration (OPA). Congress gave credence to this new governmental agency by passing the Emergency Price Control Act in 1942. The director of the OPA was given the authority to determine the price of a product that he determined to be “generally fair and equitable.” He also had the authority to sue corporations and retailers for damages if they violated the price limits. During the last year of World War II over 71,000 retailers were forced to pay $5.1 million for violating price limits.
Much like recent polls which have shown that Americans consider gasoline prices to be one of the most pressing issues that the government must address, in 1941 and 1942 polls showed that the public wanted the government to limit corporate profits and the prices of many commodities. Consequently, the OPA simply froze most prices in March, 1942. When corporations and retailers attempted to skirt the OPA, President Roosevelt issued an executive order in October, 1942 creating an Economic Stabilization Director for the nation.
The director was given the authority to set national prices for most items. And President Roosevelt made him responsible for preventing increases that were unnecessary and unfair. The executive order mandated that the Economic Stabilization Director’s office “…in fixing, reducing, or increasing prices, shall determine price ceilings in such a manner that profits are prevented which in his judgment are unreasonable or exorbitant.”
Businessmen complained that these governmental limitations on profits and prices violated their rights. However, the Supreme Court disagreed. In the case of Yakus v. United States, the Court found in 1944 that the price limits were constitutional. The court ruled, “There is no principle of law or provision of the Constitution which precludes Congress from making criminal the violation of an administration regulation.”
When the war ended, the OPA and the Economic Stabilization Director were abolished. Not surprisingly, corporate profits soared. In the year following the end of World War II, consumer prices rose 67.4%. According to economic historian Harold Vatter, one of the “…outstanding economic performance achievements by the United States in World War II… was holding down prices, mainly by general government controls.”
President Bush insists that we are engaged in a global battle similar to the Second World War. If that’s the case, he should insist on limiting soaring oil prices. He has both historical and legal precedents to support this. However, it’s hard to imagine that he will. Given his close ties to the business community, and especially the oil industry, it seems likely that he won’t do much to stop rising gasoline prices.
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September 10, 2005 - Gene C. Gerard taught history, religion, and ethics for 14 years at a number of colleges in the Southwest and is a contributing author to the forthcoming book Americans at War, by Greenwood Press.
