Wage and Price Controls
Wage and price controls were imposed on August 15, 1971, largely in response to widespread dissatisfaction with the slow rate at which inflation was tapering off--or, perhaps more accurately, widespread failure to recognize that inflation was tapering off, at whatever rate. Phase I, a ninety-day freeze, was followed by Phase II, a more flexible system involving a Price Board and a Wage Board which had to approve increases above a specified minimum in industries and concerns subject to their control. As the strains under Phase II began to accumulate, it was replaced in early 1973 by Phase III, which lifted most controls. The simultaneous explosion in food prices, never under controls, produced a very bad press for Phase III, and on June 11, 1973, the President imposed a new wage and price freeze in the form of Phase IV, which I labelled "A Monumental Folly" ( June 25, 1973). But, to paraphrase the remark legend attributes to Galileo after the recantation of his heliocentric views ("eppur si muove!"), inflation roared on, oblivious of the passing phases.
The utter failure of price and wage controls finally led Congress to permit the legislation allowing them to elapse. My negative reaction to each imposition of controls, and my applause for each weakening, is recorded in successive columns in this chapter (as also in some columns in earlier chapters). However, it would be premature to suppose that we have truly learned our lesson. Price controls have been imposed repeatedly for more than two thousand years. They have always failed, yet they have been repeatedly resurrected. The reimposition of controls in Britain, discussed in "A Cold Day for Britain" ( November 27, 1972), is a recent example and already it has largely followed the pattern of prior examples, ending in an accelerated inflation, widespread industrial distress, and the