There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don't know we don't know.
 | |
| Donald Rumsfeld, chariman of President Nixon's Cost of Living Council |
Slavoj Žižek added the category of unknown knowns to Rumsfeld's taxonomy. Things we know but don't know that we know. For example, we know that on August 15, 1971, President Nixon announced his "New Economic Policy," which include wage and price controls, a 10% surcharge on imports and the closing of the official gold window. This was the final nail in the coffin of the Bretton Woods agreement.
We also know that a number of significant statistical trends take shape shortly after that event, two of which were a growing gap between real hourly compensation and productivity and a steady increase in labor force participation.
 |
| BLS: "The compensation-productivity gap: a visual essay" |
If wage controls worked, it should not be surprising to see a growing gap between productivity and compensation. And if wages stagnated, it should not be surprising to see growing labor force participation as households attempted to compensate for stagnant wages by supply more hours to the workforce. Running faster to stay in place.
Interesting, sir. But I cannot go where you want to take me.
ReplyDeleteMinor point: It wasn't wage controls, it was wage and price controls, and it ended after 18 months or so, if memory serves. But on your graphs, the trends continue. Inexplicably.
Major point: You seem to suggest that Nixon's NEP was the cause of wage decline. I agree NEP was a key moment and perhaps a turning point, But NEP wasn't a spontaneous gesture on Nixon's part. It was a move in response to a prior problem.
I suggest that the prior problem, even in the late 1960s, was excessive private-sector debt.
ArtS
Arthurian,
ReplyDeletePerhaps you are reading too much into "where I want you to go". If you'll look at my first paragraph, I identify them as "wage and price controls." Now wage and price controls are notoriously circumventable. Enterprises can evade price controls by changing the characteristics of the products they sell. Wage controls can also be circumvented in various ways.
You'll also note that I called the Nixon NEP "the final nail in the coffin." That expression usually refers to the culmination of an ongoing process rather than a single, spontaneous gesture.
I don't know off hand when the NEP controls expired but Congress repealed them in 1974. Nevertheless, some kinds of guidelines remained in the policy mix through the Ford (WIN) and Carter administrations. Meanwhile the NAIRU idea was taking hold.
All that I was trying to point out was that NEP was "a key moment and perhaps a turning point." So it seems to me that we basically agree.
Agreement is good. And I am all in favor of chasing down the problem to its root. It creates a false impression to start in the mid-'70s with oil. Much better to go back to Nixon. I can see that.
ReplyDelete..."the final nail in the coffin." That expression usually refers to the culmination of an ongoing process...
Ah, understatement. I love it. Yeah, I missed or misapplied that 'final nail' thing, somehow. Swayed by your post title, to be sure.
Well I have now found your menu there, up top. (It only took two visits!) I'm gonna go read a couple of 'em.
Delighted to have you here, Arthur.
ReplyDelete