Phase II: The U.S. Experiment with an Incomes Policy

Abstract

THE TERM INCOMES POLICY refers to a wide range of government measures for coping with what has been a major dilemma of western market economies in the post-World War II period-the need to reconcile a politically acceptable minimal rate of unemployment with a politically acceptable minimal rate of inflation. These policies have developed out of growing disillusionment with the ability of aggregate demand management, through traditional fiscal-monetary policy, to provide acceptable performance in both areas simultaneously. The incomes policies used have ranged from limited attempts to improve the functioning of individual markets through relatively mild voluntary programs (such as the wage and price guidelines that were introduced in the early 1960s in the United States) to complete government control of all wages and prices, such as has been applied during wartime. European governments have generally been far more willing than has the United States to experiment with various kinds of incomes policies. But these experiments have had, at best, ambiguous results. Any general conclusion about their effectiveness is difficult because their objectives, the environment in which they were tried, and the formal arrangements have all varied widely.'