Skip to main content

Price controls once again

I was off for a few days. In a previous post on price controls, in the comments, I suggested the book by Hugh Rockoff "Drastic measures A history of wage and price controls in the United States" and posted the following quote, which suggests under which conditions they were efficient in the 1940s (1984, p. 108):
"In a sense the democratic process wrote its own evaluation of controls: Selective controls were a failure; the hold-the-line policy was initially a success; but failed when, at the end of the war, the constraints on collective bargaining and rationing became too confining. The statistical record, on the whole, tends to confirm this judgment. Perhaps the simplest question is, Did controls "work" in the elementary sense that the rate of inflation was kept below some arbitrarily small figure, say 5 percent per year? The answer that emerges (Table 4.3) depends on the particular subperiod one examines. From April 1943, when President Roosevelt issued the Hold-the-Line Order, until June 1946, when controls temporarily expired, inflation was held to a measured rate of only 2.3 percent per year. The true rate was probably somewhat higher, but even with an allowance for errors in the published index - an estimate of inflation partially corrected for these errors is in parentheses - controls were a success in this elementary sense. On the other hand, under less than total control the rate of inflation was not effectively restrained. Of particular interest are the periods April 1942 to April 1943 and February 1946 to June 1946 which give the rate of inflation under the General Maximum Price Regulation and under President Truman's reconversion policy, respectively. In both cases the economy was under extensive price controls, but in neither case was the rate of inflation held down. The difference seems to be that during the high tide of price controls, they were backed up by a vigorous enforcement effort and three important supplementary measures - wage controls, the seizure of noncomplying industries, and rationing both of resources and of final products."
The book is available here.

Comments

Popular posts from this blog

A few brief comments on Brexit and the postmortem of the European Union

Another end of the world is possible
There will be a lot of postmortems for the European Union (EU) after Brexit. Many will suggest that this was a victory against the neoliberal policies of the European Union. See, for example, the first three paragraphs of Paul Mason's column here. And it is true, large contingents of working class people, that have suffered with 'free-market' economics, voted for leaving the union. The union, rightly or wrongly, has been seen as undemocratic and responsible for the economics woes of Europe.

The problem is that while it is true that the EU leaders have been part of the problem and have pursued the neoliberal policies within the framework of the union, sometimes with treaties like the Fiscal Compact, it is far from clear that Brexit and the possible demise of the union, if the fever spreads to France, Germany and other countries with their populations demanding their own referenda, will lead to the abandonment of neoliberal policies. Aust…

A brief note on Venezuela and the turn to the right in Latin America

So besides the coup in Brazil (which was all but confirmed by the last revelations, if you had any doubts), and the electoral victory of Macri in Argentina, the crisis in Venezuela is reaching a critical level, and it would not be surprising if the Maduro administration is recalled, even though right now the referendum is not scheduled yet.

The economy in Venezuela has collapsed (GDP has fallen by about 14% or so in the last two years), inflation has accelerated (to three digit levels; 450% or so according to the IMF), there are shortages of essential goods, recurrent energy blackouts, and all of these aggravated by persistent violence. Contrary to what the press suggests, these events are not new or specific to left of center governments. Similar events occurred in the late 1980s, in the infamous Caracazo, when the fall in oil prices caused an external crisis, inflation, and food shortages, which eventually, after the announcement of a neoliberal economic package that included the i…

What is the 'Classical Dichotomy'?