I remember that period very well, I had just graduated from Butler U in May 1970. I passed my first pharmacy board test and got licensed in July 1970 in KY. I now had my Pharmacist license and a job with a regional chain which – at the time – was a good income, so “we” decided to add to our family and what turned out to be our only Daughter was born in Aug 1971. I remember when gasoline increased to the awful level of the $0.40/gal range, and fuel was rationed. But $.45/gal in 1973 was like gas at $2.62/gal in 2020. Wasn’t fuel ~ $2.00/gal at the end of 2020? How much are you paying for fuel today? You could only purchase fuel on odd or even days- based on the last digit of your license plate. The speed limit on all the interstates was lowered to 55 MPH. I remember people talking about if fuel got to $1.00/gal. They were going to stop driving.

In hindsight, the only real winner from these price controls – was Nixon himself – because it helped him get elected to a second term.  He ended up resigning after “The Watergate scandal” at abt 16 months into his second term. Of course, Nixon’s (abbreviated) second term was plagued by a stock market crash, a surge in inflation, and the 1973 oil crisis. With this fall’s election are we looking at the possibility of history repeating itself?

Did Nixon’s price freeze influence future U.S. economic policies

Nixon’s price freeze, part of his New Economic Policy in 1971, had a significant impact on future U.S. economic policies, although not always directly. The immediate effect of the price freeze was a temporary halt in inflation, but it did not solve underlying economic issues, and inflation re-emerged once the controls were lifted[1][2][3].

The price freeze and associated measures, such as ending the dollar’s convertibility to gold, marked the end of the Bretton Woods system and led to a shift towards a system of floating exchange rates[2][3][5]. This transition had a lasting influence on international monetary policy.

Domestically, Nixon’s use of wage and price controls was a notable departure from traditional economic policy and demonstrated the government’s willingness to intervene directly in the economy during times of crisis. However, the long-term economic instability that followed, including stagflation in the 1970s, led to skepticism about the effectiveness of such controls[3][4].

While Nixon’s price freeze itself did not directly influence specific future policies, it contributed to a broader understanding of the limitations of wage and price controls and the importance of addressing structural economic issues. The experience highlighted the challenges of balancing inflation control with economic growth, influencing future economic strategies and policies in the U.S.[4][5].

Citations:
[1] https://www.counterpunch.org/2022/09/22/nixons-famous-price-freeze-did-stop-inflation/
[2] https://www.federalreservehistory.org/essays/gold-convertibility-ends
[3] https://en.wikipedia.org/wiki/Nixon_shock
[4] https://millercenter.org/president/nixon/domestic-affairs
[5] https://history.state.gov/milestones/1969-1976/nixon-shock
[6] https://time.com/archive/6876939/the-nation-nixons-freeze-and-the-mood-of-labor/
[7] https://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_nixongold.html
[8] https://www.wsj.com/articles/nixon-fight-inflation-price-controls-stagflation-gas-shortages-biden-democrats-reconciliation-bill-federal-reserve-11628885071

Was President Nixon’s second price freeze more successful than the first 90-day price freeze

President Nixon’s second round of price controls, which followed the initial 90-day freeze, was not more successful than the first. The initial freeze, implemented in August 1971, was considered a short-term success because it temporarily halted inflation and was popular with the public and business leaders. However, the subsequent phases of price controls, which were intended to maintain the initial gains, did not achieve the same level of success.

The second round of controls aimed to be more flexible but faced significant challenges. Inflation returned after the controls were lifted, and the broader economic issues were not addressed. This led to economic instability and contributed to the stagflation of the 1970s, characterized by high inflation and unemployment.

While the initial price freeze was seen as a bold and effective move in the short term, the longer-term effects of the extended price controls were less favorable. Inflation eventually rose to higher levels than before the controls, reaching double digits by the mid-1970s[1][3]. Therefore, the second round of price controls did not succeed in achieving sustained economic stability or controlling inflation in the long run.

Citations:
[1] https://www.counterpunch.org/2022/09/22/nixons-famous-price-freeze-did-stop-inflation/
[2] https://www.citywatchla.com/important-reads/25549-1971-nixon-s-famous-price-freeze-did-stop-inflation
[3] https://www.aier.org/article/nixonomics-in-retrospect-devaluation-and-wage-price-controls-august-15-1971/
[4] https://newrepublic.com/article/162931/richard-nixon-changed-us-economic-policy-forever
[5] https://study.com/academy/lesson/richard-nixons-economic-policies-stagflation.html
[6] https://politics.stackexchange.com/questions/2631/what-is-nixons-wage-and-price-control
[7] https://www.investopedia.com/terms/n/nixon-shock.asp
[8] https://millercenter.org/president/nixon/domestic-affairs

 

Filed under: General Problems