AN EXTRAORDINARY TIME

An economic historian challenges both politicians and economists in this account of why the post–World War II economic boom came to an end and what followed.

Former Economist finance and economics editor Levinson (The Great A&P and the Struggle for Small Business in America, 2011, etc.) argues that 1973 was when the world changed course. Then, he writes, “average income per person around the world leaped 4.5 percent. At that rate, a person’s income would double in sixteen years….Average people had reason to feel good. And then the good times were over.” The author considers various causes—e.g., the first oil shock, when OPEC, following Saudi Arabia’s lead, hiked its prices by 400 percent, and foreign exchange volatility, which preceded President Richard Nixon’s decision to take the dollar off gold in August 1971. Levinson also considers the ineptitude of both politicians and economists as major contributors to the crisis. Neither “had any idea what was causing the ailment. They acted because they were under pressure to act, not because they had confidence in their prescriptions.” This view is absolutely worth heeding in these days of unprecedented worldwide financial experimentation. Levinson contends that beginning with Arthur Burns, the chair of the Federal Reserve from 1970 to 1978, efforts to control inflation proceeded from doctrinal bases that only a few years later would be considered “bizarre.” The author shows the ending of a world in which government action was thought to be capable of providing competent direction to economic processes. He associates that world with two thinkers: Argentinian Raúl Prebisch and German Karl Schiller. Prebisch advocated import substitution as a pathway to development for developing economies, while Schiller was a master planner. Free-market advocates Margaret Thatcher and Ronald Reagan changed that bygone world, but in Thatcher’s case, Britain didn’t achieve growth comparable to the times before the 1970s.

A cogently argued account that lays bare the similarities and differences between the world today and earlier theoretical shortcomings.