4 - World War II: Attacking inflation directly

Summary

The executive order I have signed today is a hold-the-line order.

To hold the line we cannot tolerate further increases in prices affecting the cost of living or further increases in general wage or salary rates except where clearly necessary to correct substandard living conditions. The only way to hold the line is to stop trying to find justifications for not holding it here or not holding it there.

Franklin Delano Roosevelt, April 8, 1943

The experiment with controls during World War II was the longest and most comprehensive trial in America's history. The program evolved through a series of phases from early exhortations to an elaborate series of formal controls. An examination of the effects of these policies requires, at the minimum, a working knowledge of these phases since each one left a distinct imprint on prices, the black market, and so forth. But in laying out the “life cycle” of the controls it is worth asking what political forces produced this changing pattern. The answer to this question will tell us something about how the changing balance of costs and benefits was perceived by the public, by business, and by the government, something that the statistical record alone cannot reveal.

Thus, a political history of controls is presented in the first section. The second section, “The Effect on Prices,” launches the examination of the statistical record with a look at the positive side of the ledger, the reduction of inflation. The questions asked are whether controls reduced inflation, by how much, for how long, and in what relationship to the structure of controls.