Nixon announced wage and price controls this week in 1971 to combat an inflationary problem caused by Johnson’s and Nixon’s excessive war and domestic government spending.
In a nationally televised address to the nation in August of 71, he ordered a 90-day freeze on all prices and wages. After the 90 day freeze any increases in wages or prices would have to be approved by the federal government.
By the summer of 1972 it was obvious that the controls weren’t providing any positive benefits and lots of negative ones, including empty store shelves. Treasury Secretary George Shultz in 1973 told Nixon that at least we learned ‘that wage-price controls are not the answer’ for fighting inflation.
Milton Friedman predicted the program’s ‘utter failure’ and the re-ignition of inflation in the near future. After all the controls were removed in the spring of 1974 inflation shot up to 11 percent and stayed high until Paul Volcker created two recessions in 1980 and 1981-1982 to finally end the inflationary pressures from the late 60s through the early 80s.
Theodor Reik said in 1965, ‘history may not repeat itself, it merely rhymes’. In this case it will likely repeat itself.
Source: Nixon’s Price Controls by Gene Healy, 2011, Cato.org. Graphic: Orissapost.com, 2021.
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