To Calleo (European Studies, Johns Hopkins), inflation is the measure of the American economy's health in a world context....



To Calleo (European Studies, Johns Hopkins), inflation is the measure of the American economy's health in a world context. Reviewing the history of economic policy from Kennedy to Reagan, he attributes inflation more to an excess of expectations than to any other single cause. First came Kennedy's fun-employment policies; the cost of Vietnam--and Johnson's decision not to increase taxes to pay for it--only exacerbated a situation that was already out of hand. The combination of domestic demands for a piece of the no-longer-expanding pie, and an untenable international monetary system based on the dollar, led to Nixon's attempt at a solution through abandoning that international system as part of the 1971 New Economic Policy: Nixon's ""revolution,"" in Calleo's description. But the revolution fizzled when, following the 1973 relaxation of wage and price controls, domestic prices soared. Also, the new freedom in international currency exchange left the American economy more susceptible to increased world inflation. In addition to over-stimulating the economy, government policy encouraged wasteful off consumption; and the 1973-74 OPEC price increase was the final, if predictable, blow to Nixon's policies: by the time Watergate forced him out of office, the economy was in a shambles. Kissinger, Calleo maintains (with little historical foundation), attempted to use political means to compensate for economic woes; i.e., to dominate Western Europe and Japan to prevent them from retaliating for the effects of a declining dollar and domestic American inflation; to control the Middle East to forestall further disruptive oil price rises; to achieve dÉtente with the Soviets to keep them from exploiting US weakness. Carter is then scored for giving ground in each of those areas, without solving the problems of the domestic economy. The solution? A new domestic politics based on restraint by all claimants for shares--to be effected by leadership. A limited analysis, fixated on inflation--and wobbly even on those terms.

Pub Date: May 1, 1982


Page Count: -

Publisher: Harvard Univ. Press

Review Posted Online: N/A

Kirkus Reviews Issue: May 1, 1982