COMMENTARY: Governments have iffy record of whipping inflation with controls

Peter Black, Local Journalism Initiative reporter

peterblack@qctonline.com

“Zap, you’re frozen!”

That zinger will come to the minds of Canadians of a certain generation whenever there is talk of measures to combat inflation, most recently by U.S. Democratic Party presidential candidate Kamala Harris.

The “zap” line is also Canadian political code for saying one thing during an election campaign and doing the opposite once the campaign is over and power safely secured.

The quote comes from that most quotable of prime ministers, Pierre Elliott Trudeau. While not as famous as “Just watch me,” “There’s no place for the state in the bedrooms of the nation” or even “Fuddle-duddle,” the “Zap, you’re frozen” quip more or less sums up the July 8, 1974 federal election. Yes, 50 years ago. Sigh.

Trudeau routinely delivered the line in his stump speeches, mocking then-Progressive Conservative Party leader Robert Stanfield’s pledge to bring in a 90-day freeze on wages and prices to put the brakes on inflation, at that time running at about 11 per cent, the highest since the 1920 hyperinflation spike of 20 per cent.

The Liberals went into that campaign fearing Trudeau’s reign could come to an abrupt end, the party having come within two seats of losing power in the infamous “the Land is Strong”-themed 1972 campaign.

The PCs and NDP had teamed up – imagine that! – to defeat the government on a budget confidence motion scarcely two years into the Liberals’ minority government.

It wasn’t just the frozen wages bit that seemed to catch on with voters. Twenty-six-year- old (!) Margaret Trudeau, freed somewhat from her cage and allowed to speak at campaign stops, laid on a charm offensive that cast her austere husband in a humanizing light.

In contrast to the romantic, glamorous Trudeaus, there was the stodgy Stanfield, who had the colossal misfortune of being photographed fumbling a tossed football, looking the very picture of a bumbling old man. The fact is, Stanfield had managed to catch a few of the passes lobbed by reporters before the fateful photo was snapped.

No matter. As one wizened political observer opined at the time, Stanfield’s “viral” football fumble pretty much guaranteed a Liberal election win. And so it did.

Trudeau stormed back with a substantial majority, and scarcely 18 months later, under the Anti-Inflation Act, brought in a version of wage and price controls.

Just as economists and politicians scoff at Harris’s hazy proposal to deal with grocery price gouging, so too did they dismiss the Liberal plan to arrest inflation through wage and price controls.

“Wage controls” in the plan were relative, given that they limited pay increases of federal employees and those in companies with more than 500 workers to 10 per cent in the first year, eight per cent the next and six per cent afterwards.

Did they work? The proof is in the economic pudding, one suspects. In 1977, two years after the measures were imposed, inflation dropped to eight per cent – still astronomical by current standards, given the apocalyptic reaction to the 8.1 per cent peak during the pandemic.

However, a range of inter- national factors forced the inflation rate up until it hit its modern-day annual average peak of 12.5 per cent in 1981. The Liberals again felt compelled to bring in measures to get wages and prices under control. Who remembers the “six and five” anti-inflation program of 1982 that targeted federal workers? They probably haven’t forgotten.

The lesson here is that government control of the marketplace to reduce inflation is a fraught political tool that reeks of failed communist regimes – hence Republican name-callers coming up with “Comrade Kamala.”

With Canada’s current inflation rate settling back to the sub-three per cent zone it was in for years before the pandemic – thanks largely to the Bank of Canada’s silky- soft hands on the levers of the economy – much of the steam has dissipated from the outcry for governments to do something drastic.

True, housing costs are still the villain of the inflation piece, but no one in a position of power, not even the NDP, is calling for rent controls – a matter, nevertheless, under provincial jurisdiction.

And if they did, who would say to landlords, “Zap, you’re frozen?”