RECENT ECONOMIC AND POLICY DEVELOPMENTS in the areas of stabilization,
allocation, and distribution help explain the current political mood in
some parts of the United States in favor of greater protectionism.
In the area of macroeconomic stabilization, anti-inflationary policies in
1968-71 led to an undesirably high rate of unemployment. For a number
of reasons, these had only limited success in reducing the rate of inflation
at the hoped-for speed; the result was the price controls imposed on
August 15, 1971. The inflation, an increasingly overvalued dollar, and
business cycle developments here and abroad placed pressure on both our ability to export and on U.S. industries that compete with imports, depressing the U.S. merchandise trade balance from a $3.8 billion surplus
in 1967 to a $2.7 billion deficit in 1971.