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We Saw How Price Controls Worked in the 1970s. Did We Learn Anything?
Since Kamala Harris assumed the role of Democrat presidential nominee, she has presented few specific policy proposals for voters to use in making their ballot decisions. As I was writing some posts over the weekend, detailing my work experiences with the changes that took place in that timeframe, including automation eliminating most paper check transactions, I remembered some other events of that period.
The Vietnam conflict had been a major issue for Americans as the decade of the sixties concluded, but it was in the seventies when we got some real learning experiences in macroeconomics and government monetary policy interventions. The American economy went into what was termed an economic recession in 1970. That was a new experience for many Americans, and it was a big part of what prompted me to leave the small data processing service bureau where I had been employed for three years after leaving a position in commercial bank operations systems development.
I remember the first half of the decade as being dominated by political issues: President Nixon’s dealings with China, the election campaign against Democrat George McGovern, Vice-President Agnew’s expulsion from office for uncovered misbehavior, and Gerald Ford replacing him; Watergate and Nixon’s resignation, Ford becoming president, and wrapping up with the end of the American involvement in the Vietnam conflict. Wow! That seems like a really busy half-decade — and I left out several significant events. But we were just getting started.
After Nixon left office, the 1976 presidential campaign started. I recall that Ronald Reagan, former Hollywood actor and governor of California challenged President Ford but the incumbent got the nomination and was pitted against a former Democrat governor of Georgia, Jimmy Carter. Guess what the Republican election campaign slogan was: “WIN,” or “Whip Inflation Now.” It didn’t work. Carter won the election, but “WIN” said a lot about America’s economic dilemma during the first half of the decade.
This was about the time that I started working at the Treasury Department, managing the systems development project to convert federal check payments to electronically delivered Direct Deposit. Both inflation and interest rates rose over time to double digits. The OPEC energy cartel limited market production of crude oil, and this had an immediate effect on the world market price. Retail gasoline prices rose rapidly in America. The Carter Administration placed price controls on retail gasoline at the pump, and this created shortages in supply immediately. This created a new problem for the people in our society.
The gap created distanced demand from the supply of retail gasoline, causing enormous lines at gasoline stations, which were aggravated by the shortage that left many stations without gasoline to sell. A rule was put in place to limit customers at stations to alternate days depending on whether tags ended in even or odd numbers. This reduced the size of lines, but they were still long and this just added to the frustrations of a people already burdened with inflation and high interest rates. My family and I experienced it all very directly.
And it eventually arrived as an issue in my job responsibility. The professional economists in the Carter Administration and the Treasury Department were of two minds. Those who supported the price controls on retail gasoline, which were already in effect at something like $.75/gallon, considered implementing rationing similar to what had been done during WWII. This would involve my staff in analysis, for planning how to produce and distribute rationing coupons for gasoline. The more free-market economists said the short supply problem would not exist and would go away if the price controls were removed, allowing the price to rise to the world market price — somewhere in the neighborhood of $1.50/gallon. The latter approach was taken and the problem went away. (A miracle.)
So my Operations Planning and Research Staff went back to work on getting rid of checks.
Published in Economy
I sure would like to know your formula for relying on not-so-good people to enforce laws that probably tend to limit their ability for graft, etc.
Checks and balances. Have each group wanting to protect their own turf and power.
Problem is, they’re often not in competition. Especially if they agree to cover for each other.
Formula? How about using the formula in the U.S. Constitution as a guide for how to do it? And as I said before, it’s not just about enforcing laws. Our Founders knew that.
That’s the point. That’s the problem, and you’ve declared your intention to do nothing about it.
Not at all. I’m simply recognizing that it requires good people – let’s call them “a religious, moral people” to coin a phrase – in those positions, or else no amount of laws really matters. I think the problem is people – perhaps including you, it seems – who somehow believe that passing a certain number/type of laws will basically force people to be good. The evidence of that is… difficult to find. You also seem to assume that people in power will balance each other out, trying to “protect their own turf” etc, but that again fails to address all kinds of problems regarding collusion, etc. And again, passing laws against collusion accomplishes nothing if you elect/hire colluders into office. They simply collude against enforcing the laws against collusion. And so they ALL get rich, and acquire power, at our expense.
I also think it takes people elected into government committed to serving the people and the voters must be capable of and willing to identify such people. This somewhat resembles a circular process that must be repeated generation after generation and the fact is there are actual enemies of the objectives of good government sought who will work to undo it. We are seeing how that works.
And they don’t necessarily have to be actually bad people in government, either. Not if they’re stymied by cries of “racism!” etc just for noticing that – for example – most black people are killed by other black people.
Think quality of laws rather than quantity. Like what was done under our Constitution.
Nah. Passing laws won’t do it. You need institutions and institutional arrangements. You might need laws to get that done. And it won’t force people to be good. It might make it in their interest to do some good, though.
The evidence of that is in our nation’s history.
I don’t assume it. It certainly won’t happen if all you do is sit on your thumb and vote now and then. But it gives us weapons to use.
That’s why I don’t advocate passing laws against collusion, though I suppose some specific laws could fall into that category if you chose to label them that way. But there is no “colluder gene” that makes some people colluders and others not. We have a system of constituent services that makes members of Congress collude with the administrative state instead of keeping it in check through withholding funds, etc. All members of Congress do that. They have no choice. They may start out as the cleanest corruption-free people you could elect, but once they’re in office they have no choice but to take part in corruption, because we the people demand it. And people on Ricochet defend that form of corruption.
And electing “good” people is not going to help, because they have no choice but to take part in that collusion.
And somehow, every bad economic metric gets worse since then. Imagine.
Even this new college graduate in 1970 (TAMU, class of ’69) thought that going off the gold standard was a mistake. But there were excuses.
And milk. Even Ronald Reagan could not eliminate the dairy compacts so beloved by prominent Democrats like Proxmire.
As I remember, the price controls for oil, gasoline and natural gas were at the wellhead and the pipeline. Those are areas in “interstate commerce” and under that quaint distinction.
(that was Carter’s “energy crisis”)
The Nixon Administration printed millions of gasoline ration coupons. They featured a portrait of that notorious mercantilist, George Washington. He also appointed Frank Zarb as the energy czar. His job was to prove Hayek was right about government having no idea how to allocate scarce resources.
(that was Nixon’s “energy crisis”)