Economic Policy: The Great Reversal
OPPOSITION to any form of "incomes policy"--government intervention to affect wage and price adjustments in the market--had long been a cherished doctrine among economic conservatives. Even voluntary controls, Arthur Burns warned in 1964, would "throttle the forces of competition" and lead to costly inefficiencies. 1 Milton Friedman went even further. Attempts to suppress inflation through government intervention, the Chicago economist said, would "produce waste and misallocation of resources, encourage bribery, corruption, and disrespect for the law. They are a far greater hindrance to economic development than open inflation."2
Richard Nixon quite agreed. During the campaign Nixon had disparaged the Johnson administration's policy of announcing wage and price "guideposts" as a means for combating inflation. Guideposts, he said, would not work, and might lead to mandatory wage and price controls. Mandatory controls, he insisted, citing his own experience with the Office of Price Administration at the beginning of the Second World War, "can never be administered equitably and are not compatible with a free economy," and result in "rationing, black markets, regimentation."3
Inflation, as measured by the rise in the consumer price index, was 4.7 percent in 1968, more than twice the average annual rate of inflation from 1956 through 1967. Unemployment, on the other hand, at the end of the year had fallen to 3.3 percent, its lowest level since 1953. 4 The new administration's primary economic problem was to
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Publication information: Book title: Conservatives in an Age of Change:The Nixon and Ford Administrations. Contributors: James Reichley - Author. Publisher: Brookings Institution. Place of publication: Washington, DC. Publication year: 1981. Page number: 205.
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