Dangerous Currents: The State of Economics

Dangerous Currents: The State of Economics

Dangerous Currents: The State of Economics

Dangerous Currents: The State of Economics

Excerpt

For more than a decade now the engines of the world's economic ship have been slowing down, with growth occurring at an ever slackening pace. Meanwhile, the ship has been battered repeatedly by both inflation and recession. What started as inflation after the Vietnam war and the 1973 OPEC price hike developed into stagflation. Unemployment soared and inflation got worse as recessions got longer and hit the economy ever more frequently. By the early 1980s, talk of another Great Depression could no longer be dismissed as kooky; it had become a genuine possibility. Economic growth had stopped everywhere: east-west, north-south. Unemployment was in double digits in both America and Europe, with the rate in Great Britain above levels reached in the 1930s. And everywhere one looked -- American savings-and-loan institutions or the Mexican banks -- ominous financial cracks had begun to appear.

Yet our navigators, the economists of the world -- the people with the charts and compasses -- cannot seem to agree on what course should be followed. And nothing tried so far seems to work. Compare the routes chosen by American President Reagan and French President Mitterrand, whose disagreement with each other is nearly complete. One called for a hard turn to the right; the other, a hard veer to the left. Reagan lowered taxes on the rich, while Mitterrand did the opposite. Mitterrand expanded the social safety net; Reagan did the opposite. Reagan deregulated the economy; Mitterrand embarked on a program of nationalization. Reagan opted for a monetarist contraction, Mitterrand for a Keynesian expansion. How could . . .

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