Industrial Structure and Price/Wage Controls: The U.S. Experience

Abstract

President Nixon’s decision to invoke the 1970 Economic Stabilization Act in August, 1971, is generally regarded as a surprising and drastic reversal of U.S. economic policy. Adopted in peacetime by a Republican President ideologically opposed to controls, and opposed to the Stabilization Act of 1970 specifically, it was, of course, a surprise. Viewed from the perspecticve of U.S. long-term economic policy development, however, the Freeze and Phase II represent more an extension of the wage/price guideposts of the 1960’s than a sharp break with earlier economic policy. The rationale for the program has been criticized on the one hand for being naive in terms of its perception of economic processes, and on the other hand as representing pure election-year politics. Whether the controls decision was economically sensible will be argued indefinitely. From the standpoint of political imperatives, the 1971 game plan clearly was no longer tenable, and the 1974 economic policy mix may face the same fate.