Thursday, November 10, 2011

Nixon's Biggest Mistake

Although the Watergate scandal was the incident which ultimately removed Richard Nixon from the presidency, it may not have been his worst blunder. While the scandal did damage the public psyche and created high levels of cynicism and distrust toward the government, he risked even greater damage to the country by means of certain economic policies. History professor John Robert Greene explains:

Virtually uninterested in economics, Richard Nixon nevertheless had reacted to the inflation of the early 1970's in a novel fashion. Acting on the advice of his secretary of treasury, John Connally, Nixon broke from the conservative laissez faire economics practiced by past Republican administrations, and on 15 August 1970 he froze wages, prices, and salaries for a period of ninety days. Renewing the freeze through April 1971 had helped little,

and it became clear that this type of interventionist policy was a failure. The cure for inflation, like any other economic malady, would prove to be an approach of simply letting the organism work itself out. Like a plant or an animal returning to homeostasis, a national economy returns eventually to equilibrium if allowed to do so. Any regulation by the government, at best, delays the return of prosperity, or at worst, prevents it entirely.