The International Binge

While the cost of living in the U.S. has risen only an average 1% a year since 1957, the rest of the world is off on a binge of price rises. In 57 non-Communist nations whose productivity is tabulated by the International Monetary Fund, the cost of living has climbed 26.8% since 1958. It rose 7.9% last year. In the United Kingdom and Germany the cost of living was up 2.8% in 1962, and in France 5.4% ; Italy has undergone a 6.6% jump in the past twelve months. Booming Japan's living costs have climbed 6.8% in the first five months of 1963, enough to threaten Prime Minister Hayato Ikeda's hopes for a doubled per capita income by 1970. In Latin America, the increases are stratospheric: Argentina's cost of living rose 31.5% last year. Chile's 20.8%, Brazil's 60.9%.

The Latin American spiral is largely the result of instability in the peso, escudo or cruzeiro, which in turn increases import prices and wrecks wage levels. In economically advanced nations, however, the increases are a penalty of unpoliced success. Expanding industrial output in the postwar years, these nations tried to avoid labor shortages with higher pay, more overtime and lavish fringe benefits--until wages finally outpaced production. At the same time, increased consumer spending competed for a relatively stable supply of goods and steadily pushed up prices, particularly of food. Britain slowed its spiraling cost of living by instituting a pay pause in 1961; Italy granted employees in state industries a massive 53% pay boost last year, far more than Italian private industry granted.

The Japanese, those old specialists in low-cost production, are now suffering most among major industrial nations from recent price rises. Spring prices of spinach and radishes, two favorite Japanese vegetables, are up 20% this year. Public bathhouses, government-regulated as utilities, got a 30% price hike in 1961, but last week owners threatened to strike to gain another 32%. Haircuts in Japan cost 40% more, laundry 30% ; even piano teachers have doubled their fees. Worriedly, Prime Minister Ikeda is considering reimposing the price controls dropped in 1954. The remedy most generally applied in other nations is to ease the duties and quotas on food imports in order to drive down local prices. Unfortunately, such a program has its own built-in hazard: it increases the foreign trade deficits that Japan and every Common Market nation except Germany are faced with.

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