Category — Nixon, Richard
Remembering the Birth of Conservationism (Part I: President Nixon’s price controls, not Arab OPEC, produced energy crisis, demand-side politicization)
[Editor note: Part II on energy conservationism tomorrow examines the energy conservation faddism of Amory Lovins.]
Richard Nixon (1913–94) got on the wrong side of economic law three years before his Watergate-related resignation from the U.S. presidency. In August 1971, in a surprise decision, Nixon imposed the first peacetime wage-and-price controls in American history.
Businessmen reined in their surprise to pragmatically offer support. John Kenneth Galbraith and Paul Samuelson offered quick congratulations. There was public approval of the ‘temporary’ action that was intended to just quell inflationary expectations (as if the problem was psychological and not the inherent consequence of expansionary money). The inflation rate was then running at about 4 percent per year.
Free-market economist Milton Friedman, knowing that shortages lay ahead, lambasted the move. So did Ayn Rand in the Ayn Rand Letter. Murray Rothbard was fiercely critical (“on August 15, 1971, fascism came to America,” he wrote); he had seen price controls and shortages before.
Nixon’s edict disabled the market process responsible for coordinating supply with demand and allocating resources to their most profitable use. Predictably, oil shortages developed, which resurrected long dormant depletionist thinking and pointed policymakers toward conservationism. After all, if price controls did not allow prices to rise and “regulate” demand to available supply, then government had to—at least according to the majority of policymakers and neo-Malthusians whose worldview dovetailed nicely with public sentiment against the energy industry.
Birth of Peacetime Conservationism
The oil crisis, contrary to popular remembrance, did not begin with the Arab Embargo of October 1973. It began with petroleum product shortages that arose in late 1972 when price controls became constraining. In February 1973, Senate hearings on fuel shortages demonstrated, in the opinion of committee chair Henry Jackson (D-Wash),
One, there has been an unprecedented breakdown in our energy supply and distribution system;
Two, the fuel shortages now being experienced are far more extensive than anticipated;
Three, more severe shortages of fuels, particularly gasoline, are in the offing. [Read more →]
May 2, 2011 No Comments