Timing is Everything

The Great Inflation and its Aftermath
Robert J. Samuelson

Talk about a period piece.

Robert J. Samuelson writes about economics for the Washington Post and, back when it was owned by the Post, he penned a column on the same subject for Newsweek. I first encountered him there and always found him a lucid explicator of whatever subject was at hand.  I didn’t always agree with him but in some ways his mandate is to explain the dismal science to the uninitiated. So he can hardly be faulted for explaining the status quo in positive terms.

Early in the present volume Samuelson describes himself as a slow writer. That’s an odd description for anyone with a 40-year career in journalism. But I wonder if it’s meant in an Einsteinian manner or was an on-press attempt to salvage credibility. Samuelson’s great misfortune was to publish in May 2008, little more than a calendar quarter away from the Lehman collapse and with Bear Stearns already a corpse being picked over by Chase. So you could argue that the phrase is meant to inoculate the author from the financial contagion that was spreading.

Because mostly this book reads as a love letter to the benign economy of the 00s. Of course, reality is much messier than the ordered logic of language and neither the 00s or the 80s or 90s were as universally rosy as some observers would have us believe. I’m enough of a social observer, though, to not disregard prevailing moods. Here in the New York metro, where lots of Wall Street funny money sloshed about, that mood approached giddiness and most chose to not see what was inconvenient.

(One example: in 2005 Freddy Ferrer ran against Mike Bloomberg for mayor talking about the 1/5th of the city living below the poverty line. Ferrer lost to Bloomberg–a product of Wall Street–by almost the same proportion–19%. Moods and views , though, are not data dependent. They may be data abhorrent.)

In any case, Samuelson believes that the great, untold story of the last fourth of the 20th century is the demise of inflation in the world’s major economies. He does an apt job of describing how the US found itself mired in stagflation in the 1970s, The blame for that mess he places squarely on the leading economists of the day who believed they had the tools to fine tune the economy. Samuelson has more sympathy for the free-market oriented types who came after the mid-century crowd had gummed up the works.

The problem with choosing sides in economics is that hindsight is always 20/20 and a healthy skepticism isn’t always rewarded. No one would disagree that Paul Volcker broke the back of inflation and that Ronald Reagan let him do it, pain be damned. That’s journalism, though. The reality is that if you study American history you’ll spend an awful lot of time on what would today be considered obscure issues: tariffs, free coinage of silver and the like. There’s a long history in the US (and elsewhere) of politics intersecting with economics and there being two sides. I can’t be the only person who remembers that the first two Banks of the United States were political footballs.

So you’ll never find Samuelson arguing that Volcker’s actions benefited business and banks more than common  people (although he quotes William Greider, whose Secrets of the Temple argued just that). Or even suggesting that the inflation rates that had everyone in a tizzy (and I’m old enough to remember those tizzies) were on a historical or global basis comparatively mild. No, inflation’s a scourge and Volcker is its Walter Reed, a heroic tale that ends in price stability and a world safer for all.

Except that the  world wrought by all the changes since Volcker–and not just the taming of inflation–was about to implode from its own contradictions.

Had Lehman collapsed in May instead of September 2008 we might have gotten a different book. Instead we have a beautiful specimen of the pre-crisis common wisdom, preserved in the amber of type and paper.


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