FOR the second time in two months, President Richard Nixon reversed his own and his party's policies with a swiftness and style that is virtually unmatched in modern American politics. What he did in foreign policy with his approach to Peking he outdid in domestic affairs last week. Casting aside "the game plan" he has so long and implacably pursued, the President announced "the most comprehensive New Economic Policy to be undertaken by this nation in four decades." The claim was merited. A show of firm leadership was clearly needed in order to get the U.S. industrial machine running smoothly once more.
He indeed laid out the most sweeping changes since the Hundred Days of the New Deal in 1933, when Franklin Roosevelt took the U.S. off the gold standard and began to get the Depression-racked economy into gear. The Nixon program had immediate and dramatic impact at home: on the first day the Dow-Jones average took a record jump on the New York Stock Exchange. But abroad there was consternation. Nixon's measures threatened a serious reversal of the postwar trend toward freer trade. They also ripped the fraying international monetary agreements that have made expanded trade possible. Canada and Japan, America's two largest trading partners, sent anxious emissaries to plead for explanations.
Declining Confidence
The Tokyo exchange led other overseas markets into a disastrous slide. Foreign exchange markets shut down, helpless in the currency confusion. Europe's finance ministers interrupted their vacations and rushed to Brussels to try to patch up the international monetary order. Only three months ago, U.S. Treasury Secretary John Connally had stoutly told a Munich bankers' convention that the dollar would not be devalued. Now it almost certainly will be.
Many factors coalesced to force the swift move. Pollster-Analyst Albert Sindlinger found early in August that the consumer confidence index had fallen to 55%—lower, he said, than during the 1957 recession. Only 27% of those he interviewed wanted to see Nixon reelected. Secretary of Commerce Maurice Stans warned that this year the U.S. may be running a trade deficit for the first time since 1893. House Ways and Means Chairman Wilbur Mills was getting ready to hold hearings on his own proposals for the economy. The final blow was a devastating new attack on the long-weakened dollar in the world's money markets.
Nixon imposed direct controls on prices and wages for the first time since the Korean War. Confronted with a situation of inflation-cum-unemployment in which the old textbook remedies were no longer working, he seemed to be committing the Federal Government to an intimate role in major pay and pricing decisions by U.S. business for some time to come. The changes were all the more remarkable for having been agreed to in the course of one short weekend at Camp David.