Incomes policy
One variant is "tax-based incomes policies" (TIPs), where a government fee is imposed on those firms that raise prices and/or wages more than the controls allow.
Some economists agree that a credible incomes policy would help prevent inflation; however, by arbitrarily interfering with price signals, it provides an additional bar to achieving economic efficiency, potentially leading to shortages and declines in the quality of goods on the market and requiring large government bureaucracies for enforcement.
Other economists argue that inflation is essentially a monetary phenomenon, and the only way to deal with it is by controlling the money supply, directly or by changing interest rates.
Some merchants having found themselves forced into a position to sell their goods for a price below cost (e.g. cost of baking bread or growing vegetables) chose to hide their expensive goods from the market, either for personal use or for sale on the black market;[7] however, the General Maximum was very successful in deflecting a volatile political issue away from the Committee of Public Safety and Maximilien Robespierre, enabling them to focus on larger political issues more closely related to completing the French Revolution.
[8] By creating the General Maximum, Robespierre shifted the attention of the French people away from government involvement in widespread shortages of money and food to a fight between consumers and merchants.
The text of the General Maximum was written towards businessmen who were profiting on a large scale from the demise of the French economy.
In practice, the law ultimately targeted local shopkeepers, butchers, bakers, and farmers-the merchants who were profiting the least from the economic crisis.
[11] The same day, Nixon also suspended the convertibility of the dollar into gold, which was the beginning of the end of the Bretton Woods system of international currency management established after World War II.
It was quite well known at the time that this would likely lead to an immediate inflationary impulse (essentially because the subsequent depreciation of the dollar would boost the demand for exports and increase the cost of imports).
In these phases, the controls were applied almost entirely to the biggest corporations and labor unions, which were seen as having price-setting power;[11] however, 93% of requested price increases were granted and seen as necessary to meet costs.
The first wave of controls were successful at curbing inflation temporarily while the administration used expansionary fiscal and monetary policies;[13][14] however, the long-term effects proved to be destabilizing.
Left unsuppressed after the initial price controls were relaxed, the overly expansionary policies proceeded to exacerbate inflationary pressures.
The Liberal government under Pierre Trudeau was originally opposed to this idea; however, after winning the election, it introduced the Anti-Inflation Act in 1975.
Unions agreed to restrict wage demands, and the government pledged action to minimise inflation and price rises.
[17] The polder model in the Netherlands is characterized by tri-partite cooperation between employers' organizations like VNO-NCW, labour unions like the FNV, and the government.
