The author rightly notes that many Americans are dubious about this president’s war propaganda. Like a growing number of Americans, we reject the Bush policy of global war. But this article has an important point, that the government can curb corporate profits in the interest of the public good. It’s happened before, and it’s worth thinking about now.
President Bush frequently compares the war in Iraq to World War II. While giving a speech at the U.S. Air Force Academy last year Mr. Bush noted, “Like the Second World War, our present conflict began with a ruthless surprise attack on the United States.” This summer, while speaking at a ceremony commemorating the 60th anniversary of World War II, Mr. Bush remarked, “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. 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 per gallon. In Michigan, gasoline prices jumped almost $1 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 these record profits is attributable to the fact that many companies bought oil reserves years ago when the prices were $10 to $25 per barrel. Oil prices are now going for upwards of $65 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. This was accomplished largely by the Office of Price Administration (OPA).
In 1941, President Roosevelt created the OPA, and gave it the authority to set the price of a product that it determined to be “generally fair and equitable.” Congress gave credence to this new governmental agency by passing the Emergency Price Control Act in 1942. The OPA 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, more than 71,000 retailers were forced to pay $5.1 million for violating price limits.
Much like recent polls that have shown that Americans consider gasoline prices to be one of the most pressing issues that the government must address, in 1942 polls showed that the public wanted the government to limit the prices of many commodities. Consequently, the OPA simply froze most prices at their March 1942 level.
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 ruled in 1944, “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 was abolished. Not surprisingly, corporate profits soared. In the year following the end of World War II consumer prices rose 67.4 percent. 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.
Gene C. Gerard is a professor of American history at Tarrant County College in Arlington, Texas. This article was distributed by MinutemanMedia.org.