The Wage And Price Freeze Economics Essay

The U.S. is treated as the world power in the universe. Its power such as the military capablenesss, economic capablenesss, resource, leading and democracy led its state toward prestigiousness and prosperity ; plus its citizens live in high populating criterion every bit good. However, in 1970s the economic diminution started to emerge owing the Vietnam war, Yom Kippur War, Arab oil crises and led the U.S. toward runaway rising prices. As a consequence, Nixon decided to put out the monetary value and pay monetary values.

Similarly, in Roman, after the decease of Marcus Aurelius in 180 century AD, Rome became convulsion and pandemonium ; civil war started to emerge. Authority of Roman was inefficient and anarchy ; in add-on, the civil war interrupted the commercialism in the metropolis and monetary value and pay rose aggressively. This position quo led to economic declined.

However, Devalued the mintage paved a manner for Rome emperors to raise the money. So Diocletion limited pay and monetary value to cut down the rapid growing of monetary value and he ordered his citizens to still maintain the same calling to guarantee the merchandises run in the same. But it did small to control the rising prices. Thus this research is to analyze the pay and monetary value freezing within both states. The undermentioned inquiries are tools to depict these plans:

Why Nixon and Diocletion set out pay and monetary value freezing?

Were both plans similarity? Diference?

How pay and monetary value was being processed

This research produces multi important point to pupils and provides the grounds why pay and monetary value being set. During that clip American faced with economic diminution owing to Arab oil crises and inexpensive natural stuffs and energy became scoured, Like Roman. In other words, the policy of both states was of import subject in the international relation.

Richard nixons Administration

A. Economy and Political

For decennaries American lived in prestigiousness and prosperity inside its state, owing to economic development with high populating criterion and high instruction. But in 1960s it faced with serious jobs as consequence of absence of foreign competition and leting the 3rd universe entree their natural stuffs easy. During Nixon came to office, American faced with runaway rising prices and great depression. The affair of economic worsening was important rise in federal shortage disbursement in the sixtiess, when Johnson disposal involved in Vietnam War and in conformity with the Truman Doctrine fund non-communist ; plus, without raising revenue enhancements in footings of its societal plan.

Another job lagged behind economic shortage was that the 3rd universe states such as Middle East and Africa started to concern about their natural stuffs peculiarly oil. Therefore, the glide of oil priced was emerged. Such processing caused U.S. no longer entree inexpensive natural stuffs. Virtually, U.S. economic system vastly depended on inexpensive energy and fossil fuels. The job was that domestic crude oil militias did non react to the demand, so it was certain that the imports from the Middle East and African were needed. The inquiry might be raised, in instance Middle East and Africa earnestly raise their the cost of energy, What happens to the Western particularly the U.S. ? However, this inquiry is non easy to reply.

Get downing from Yom Kippur war in the 1970s, the Arab states announced to halt importing oil to the states that supported Israel-the U.S. and its Alliess. Immediately, OPEC Nations began to raise their monetary value 400 per cent. Such action posed pandemonium to the West. The grounds of invariably increased the monetary value of energy owing to OPEC ‘s new activist policy and the failing of competition of dollar the universe market. However, rising prices was one of many jobs confronting American economic system. American is treated as develop and powerful state in the universe. So it industry has reached the extremum and it caused no competitory and the state ‘s fabrication was declined. Subsequently, by 1970s the U.S. faced the competition from foreign such as Japan and Europe.

Again, the Nixon disposal faced many affairs. Yet the solution that Nixon tended to press out was rising prices. First, cut down disbursement and raised revenue enhancements. But those policy impact to Congress and popular protest, so Nixon turned from cut downing disbursement and raising taxed to command of currency ; nevertheless this policy did small to control the rising prices and the U.S. still faced with stagflation in lined with raising monetary value and economic stagnancy. As a consequence, in summer 1971, Nixon released a ninety-day freezing on all pay and monetary values at their existing degrees. Subsequently on, on November he imposed what was so called phased II of his economic program: compulsory guideline for pay and monetary value addition. But the rising prices was curbed within a short period of clip while the recession went on.

Diocletian ‘s disposal

In the 3rd century, The Rome Empire came near to fall in. The emperor Diocletian ( 284-305 ) restored order and stableness at the terminal of the 3rd and beginning of the 4th century to Roman Empire. The emperor Diocletian built a new construction system for imperium. For illustration, there are about 100 territories manage by more functionaries. In 286, Diocletian regulations the E and Maximian, a strong military commanding officer in the West. Diocletian crated a new governmental construction such as a stiff economic, a stiff societal system, and a new province faith.

Economicss

More grosss needed to pay for ground forces and bureaucratism, but the people were non turning, so the revenue enhancement could non be expanded. Diocletian devised a new economic policy. First, Diocletian helped to hold stableness and prevent rising prices. He set maximal rewards and monetary values throughout the imperium. Second, Diocletian emperor passed a new system of revenue enhancement. For case, Diocletian nominated revenue enhancement aggregators more than taxpayers for aggregation revenue enhancement, and they obey their occupation good. Third, Diocletian introduced his people finished their work. For illustration, agricultural worker and town inhabitants keep their occupation, so they can non alter their occupation.

Social

Diocletian emperor created many functionaries and passing to work out societal affairs. Furthermore, he trained his military to protect Roman Empire from encroachers. Farmers rented land from landholders for agricultural.

Impact of Nixon and Diocletian Programs

There are several impacts of Nixon ‘s economic program. After he announced pay and monetary value control, there was a nutrient deficit because the husbandmans and workers did n’t truly acquire the net income from their work, so they did n’t work hard either. Price control worked merely to derive political support for those politicians who imposed it. Besides, his program of increasing involvement rate and revenue enhancement to cut down rising prices led to chaos.

There was the presentation of worker that demanded the high pay to back up their living criterion. Furthermore, when he allowed dollars to be floated against other currencies and ended the convertibility of dollar into end, it caused the unemployment rate addition and the budget shortage. The US ‘s export had been discouraged because of the high monetary value of dollar and foreign investing could non be attracted due to the instability status. At that clip, Nixon ‘s program did non work out. As a consequence, it could non merely cut down the rising prices, but besides caused the state of affairs go worse and worse.

Similar to Nixon ‘s failure, Diocletian ‘s plan besides affected to Roman. His pay and monetary value control drove goods off, made the rising prices explode, and caused national debt rise by more than 6000 % by 1997. Furthermore, his mass minting of coins of low metallic value besides increased rising prices rate and caused merchandisers halt bring forthing goods, some sold their goods illicitly and some used swap alternatively so that it disrupted trade and commercialism. As a consequence, people ‘s populating criterion became lower and lower and faced to the poorness. Furthermore, many Romans fled over the frontiers to seek safety among the savages in order to get away the revenue enhancement gather.

Comparison Both plans

Similarities

The two plans, the first 1 was instituted by President Richard Nixon in 1971, and the other 1 was created by Diocletian, Roman Emperor, in 301, have a common in term of aim. Even though the clip is so far different, the leaders of the two states ever wanted to stabilise the economic system in each state. In order to cut down rising prices and unemployment rate, they instituted those plans which imposed new revenue enhancement system every bit good as controlled the monetary value on all merchandise and pay.

Differences

However, due to the fact that there are thousand old ages difference between the two plans, so there are many differences between those plans.

First, the monetary value control of merchandise. In Roman Empire, Diocletian ‘s plan focused on most merchandises included assorted nutrient points ( beef, grain, vino… ) , vesture, and cargo charges for sea travel. While Richard Nixon ‘s monetary value control plan non merely focused on common merchandises but besides paid more attending on oil and gas which had non found yet in the yesteryear or in Diocletian period but are necessary in the present.

Second, the revenue enhancement system. Diocletian ‘s revenue enhancement system was based on estimated value of labour and land for each landholder, which means that most people had to pay revenue enhancement to the Empire. Whereas, Nixon ‘s revenue enhancement plan was enforcing a 10 per centum revenue enhancement, which means that all goods imported into the United State had to pay more 10 per centum of revenue enhancement on their goods to the authorities.

Third, the monetary value control of pay. In Roman Empire, pay monetary value were under control becuse it was fixed in peculiar work. On the other manus, pay monetary value in the United State were non fixed, but it was in control due to the authorities enforcing the jurisprudence that the man of affairs could non take down their employee ‘s pay monetary value.

Finally, the criterion of exchange. In ancient clip of Roman Empire, people used to utilize silver criterion, and until Diocletian ‘s regulation, he has abandoned silver standard, and utilised denarius for a criterion of exchange in Roman. In contrast, The United State, which had used gilded criterion, besides abandoned the gilded criterion due to the fact that President Richard Nixon imposed “ shut the gold window ” plan, which ended the convertibility of the dollar into gold.

Decision

Within 1970s U.S. encountered economic crisis owing to the monetary value of oil started to surge, so the rising prices rise invariably. It took times to fall back the method. Like Roman, U.S. set out the pay and monetary value freezing to control the runaway rising prices. However, those plans had similarity owing to taking to stabilise the economic but did small to control the rising prices. In contrary, those plans differences in footings of the execution such as merchandise monetary value control, pay control, criterion of exchange, revenue enhancements system.

This research consider as a tool to pave a manner for those who concern about pay and monetary value freezing and analyse the pros and cons of those plan ; in add-on it is a roadmap to those who concern about the universe political relation and international relation.