How Jawboning Has Worked In Canada

In Canada. Prime Minister Pierre Trudeau has tried to roll back a 5% rate of inflation by using the classic economic restraints of tight money and budget surpluses. He has also practiced a sophisticated form of jawboning, and his experience may hold some lessons for the U.S.

Last summer the Trudeau-appointed Prices and Incomes Commission sounded out leaders from business and labor on a proposed 5% ceiling for wage increases and 2.5% on prices. Labor leaders rejected the idea, largely because it provided no limit on rents or dividends.

Undaunted, the commission convened a meeting of 250 top businessmen last month and got an unusual agreement. For the rest of the year, the businessmen pledged, their price rises would be less than the increase in their costs --and they would open their books to the commissions to prove it. Provincial premiers agreed to hold down taxes, spending, and prices on many items, including auto licenses and liquor.

That left labor as the sole holdout. But union leaders also have to face elections, and they are aware that rank-and-file unionists rejected an unusually high number of contracts last year. Two weeks ago, the Canadian Labor Congress issued a statement turning down guidelines and arguing, not entirely without justification, that recession is now a greater worry than inflation.

Labor's intransigence endangered the policy of jawboning. "The business community has probably got some thinking to do on our undertaking to hold the line," said Leonard Wills, president of the Canadian Manufacturers' Association. If some companies now decide to break their commitment, he added, "it's likely to snowball, and then the whole damn thing goes out the window."

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