With inflation soaring, could revisiting price controls, as done after WWII, provide a solution today?
Inflation is nearing a 40-year high, and while central banks globally have pledged intervention, one major driver of rising prices remains largely ignored: the surge in corporate profits. In 2021, US non-financial companies saw profit margins not seen since the post-World War II era. This surge in profits is no accident; just as after WWII, supply bottlenecks created by the pandemic have provided large corporations with an opportunity to raise prices and capture windfall profits.
Though the Federal Reserve has adopted a more aggressive stance by tightening monetary policy, this approach won’t resolve issues like supply chain disruptions. The real solution may lie in revisiting strategic price controls.
Economists are divided between two camps: “Team Transitory” believes inflation will subside on its own, while “Team Stagflation” advocates for fiscal restraint and higher interest rates. However, a third path is worth exploring: the government could intervene directly by targeting the prices that are most driving inflation, avoiding austerity measures that could lead to a recession.
Drawing an analogy: if a house is on fire, the best response isn’t to wait for the fire to burn out or flood the whole house but to extinguish the flames where they’re most intense. Similarly, history suggests that a targeted approach to controlling prices could help address inflation without the broader economic harm of more drastic measures.
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