The Great Inflation and Its Aftermath: The Past and Future of American Affluence |  | Author: Robert J. Samuelson
Publisher: Random House Trade Paperbacks
Category: Book
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Rating:  30 reviews
Sales Rank: 455,424
Media: Paperback
Pages: 352
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Dimensions (in): 7.9 x 5.1 x 0.8
ISBN: 0812980042
Dewey Decimal Number: 332.410973
EAN: 9780812980042
ASIN: 0812980042
Publication Date: January 26, 2010
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Product Description
The Great Inflation in the 1960s and 1970s, notes award-winning columnist Robert J. Samuelson, played a crucial role in transforming American politics, economy, and everyday life. The direct consequences included stagnation in living standards, a growing belief—both in America and abroad—that the great-power status of the United States was ending, and Ronald Reagan’s election to the presidency in 1980. But that is only half the story. The end of high inflation led to two decades of almost uninterrupted economic growth, rising stock prices and ever-increasing home values. Paradoxically, this prolonged prosperity triggered the economic and financial collapse of 2008 and 2009 by making Americans—from bank executives to ordinary homeowners—overconfident, complacent, and careless. The Great Inflation and its Aftermath, Samuelson contends, demonstrated that we have not yet escaped the boom-and-bust cycles common in the nineteenth and early twentieth centuries. This is a sobering tale essential for anyone who wants to understand today’s world.
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Showing reviews 1-5 of 30
 Beware of Keynesians November 15, 2008
Izaak VanGaalen (San Francisco, CA USA)
78 out of 87 found this review helpful
There is no economist - that I am aware of - writing for a weekly magazine (Newsweek) and daily newspaper (Washington Post) that is more objective and nonpartisan than Robert Samuelson. Not only does he avoid promoting either Republican or Democratic economic policies, he is very critical of both.
In this book, he talks about the great inflation, which many of us remember; and the lessons learned, which many of us have either forgotten or never learned in the first place. The great inflation of the 60s and 70s was, according to Samuelson, the result of misguided attempts by the government to keep artificially high levels of employment, and to keep the economy from falling into recession. Lyndon Johnson's Great Society programs were instrumental in creating a wage-price spiral that didn't end until 1980 when Ronald Reagan was elected. Even Richard Nixon could not stop the spiral with the imposition of a wage-price freeze. Nixon too was guilty of tampering with the system by urging the Fed chairman to keep the economy out of recession. During Jimmy Carter's presidency inflation was running at 14 percent and there was indeed an economic malaise. These inflationary times should be duly noted by the incoming Obama administration as many of the advisors are speaking urgently about applying big Keynesian stimulus packages.
When Ronald Reagan came into office he did a very brave and politically unpopular thing: he urged Paul Volcker, the Fed chairman, to raise interest rates and tighten credit in order to kill the inflation beast. (One of the few compliments I have for Ronald Reagan.) This precipitated the most severe recession since the Great Depression, but it did succeed in halting inflation. The recession lasted almost two years, but it paved the way for the almost uniterrupted economic growth that we've enjoyed for the last 25 years.
The aftermath could also be called the great deflation since inflation was kept under control by a fairly strict monetary policy. What escaped the monetarists' control, however, was the amount of debt that followed from their policies. (On this topic, read also George Soros' The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means.) The amount of public and private debt soared to unimaginable heights during this period, especially the last 8 years. During this period everyone - government, corporations, and consumers - lived beyond their means, running up debts that are now drowning the economy in a sea of red ink.
It is predicted, by Samuelson as well as many other economic journalists, that we are now entering an age of less affluence or even scarcity. As we reorganize ourselves more toward production and saving rather than borrowing and spending, we will feel much less affluent than during the years of living large. This restructuring process will be drawn-out since our priorities have been distorted for such a long period of time.
Samuelson warns against new bailouts and stimulus packages in view of the damage they caused in the 60s and 70s. This is in sharp contrast to what Paul Krugman advocated in a recent New York Times article entitled "Depression Economics Returns". Krugman argued that we need much larger bailouts; better to err on the side of doing too much than too little. As evidence he reminds us that the public works project known as World War II was the biggest and most successful bailout in our history. He argues that now, as then, we are so far gone that the caution Samuelson advocates is no longer appropriate, it would indeed make matters worse. The incoming Obama administration will have some tough choices to make, and the wrong ones will be catastrophic.
Great Economic History November 21, 2008
Eric Mayforth (Houston, Texas)
26 out of 28 found this review helpful
Robert J. Samuelson asserts in this book that the last half-century has been one long economic cycle dominated by the rise and fall of inflation.
Inflation surged in the 1970s, after many years of economic policies designed to smooth out business cycles and to keep unemployment as low as possible, even at the risk of higher inflation. Fighting inflation was not a top priority in the presidencies of Nixon and Carter. Samuelson believes that Ronald Reagan would not have been elected president had there not been double-digit inflation during the Carter years, and also believes that Reagan was the only president who would have allowed Fed chairman Paul Volcker to raise interest rates to the extent necessary to minimize inflation.
The author demonstrates that the taming of inflation led, in the following years, to milder and briefer recessions, globalization, and the boom in stock prices and home prices. However, while economic growth was robust in the 1980s and 1990s, jobs were not as secure as they were in the 1950s and 1960s.
Samuelson believes that the half-century economic cycle defined by inflation is ending, and speculates about what might come next. He compares the present moment to the late Fifties, just prior to the rise of inflation in the Sixties, and discovers many similarities. He offers his opinions on what should be done for the economy (starting with, of course, controlling inflation) in the coming years.
Hopefully, the incoming administration will favor a strong currency and resist the temptation to implement more and bigger social programs, which would stifle economic growth. It is heartening to see that Paul Volcker is one of Barack Obama's economic advisors.
This timely book is a groundbreaking study of how inflation affected not just the economy at large, but the lives (and psychology) of ordinary Americans over the last fifty years. There are also a couple of really cool appendices containing statistics about GDP, inflation, unemployment, and business cycles since 1950.
The way I remember it as well February 17, 2009
Richard M. Rollo Jr. (Montebello, CA USA)
5 out of 6 found this review helpful
I've always enjoyed Robert Samuelson's articles, not that I've always agreed with him. He writes with uncommon clarity and simplicity about a subject that is often murky and difficult.
He traces the Great Inflation back to the Kennedy Administration and the bright young economists of that era who thought they had the economic tools and understanding to fine tune the economy to eliminate the business cycle. The tools were primarily Keynesian fiscal policy and the object was to keep the unemployment rate low. Monetary policy in those days was subservient to the needs of fiscal policy.
Keynesianism had an appeal both to economists and politicians. Keynes's ideas were easily adapted to mathematical models and velocity of money curves, so economists could make their ideas look much better and more scientifically convincing than they were in the real world. Politicians loved Keynesianism because it provided an intellectual justification for what they wanted to do anyway: spend other people's money. It also provided politicians with a number that was the key to their political survival, the unemployment number. Kennedy, Johnson, Nixon, and Carter knew high unemployment was the number that could crash their presidency. But, as the inflation numbers climbed throughout the 1970's, the tools of Keynesian fiscal policy stopped working. Then, Paul Volker stepped in with his version of Milton Friedman's monetarist policies and Reagan gave him political cover.
Samuelson's view of the economists and politicians of the era as well meaning bumblers rather than suspects in a "who done it" is refreshing. Many books in this area have a silly, unstated assumption that somehow the engineer wanted to have the train wreck. I am glad that he wrote it.
We can't have it all October 12, 2009
ConsDemo
1 out of 1 found this review helpful
Robert Samuelson's book "The Great Inflation and Its Aftermath" is largely an economic history of the United States after World War II but it gives particular emphasis to events up to, during and immediately after a period of high inflation that gripped the country in the 1970s and early 1980s. It is a story that has been briefly described in many news articles but Samuelson felt no one had discussed it comprehensively, thus he wrote the book and, in that sense, it is very worthwhile.
The first thing Samuelson does is sweep away the notion the inflationary period was a product of the Vietnam War or the oil shocks of the 1970s. The data he presents suggests both added only marginally to inflation and the run up in prices would have been dramatic even in absence of the two aforementioned events. Rather he lays the blame on prevailing economic theories in the early 1960s and a belief that the government could guarantee "full employment" with fiscal and monetary policy. In particular, the Federal Reserve gets plenty of blame for rapid expansion of the money supply.
It isn't until the severe recession of the early 1980s that the Federal Reserve takes serious action to reduce inflation. Samuelson credits Fed Chairman Paul Volcker and President Ronald Reagan in the fight against inflation. Volker gets credit for prescribing the harsh medicine of higher interest rates and curtailing money supply growth. Samuelson suggests that while the Fed is nominally independent, it is vulnerable to political pressure from the executive and legislative branches of government and thus Reagan deserves credit for giving Volcker political cover.
The remainder of the book is a synthesis of Samuelson's ideas on a broad array of economic topics that he has covered in his columns in Newsweek and the Washington Post. He discusses the long term solvency of programs for the elderly and the desire to combat global warming. He suggests we are entering a period of "affluent deprivation" were the collective well-being of the nation continues to improve but is unable to provide all the benefits the public expects.
Detailed economic analysis January 11, 2010
Rolf Dobelli (Switzerland)
Recessionary times have led many people to re-evaluate their long-held beliefs about the financial system. His history-based economic analysis makes journalist Robert Samuelson's fresh investigation of the insidious effects of inflation especially interesting. He covers the advent of inflation in the U.S. in the 1960s, and explains how it changed the nation's economic thought and vision. Like a mutated gene, inflation assumed a life of its own and spawned the "new economy." Samuelson presents a provocative, if debatable, argument about economics and prosperity. getAbstract recommends this detailed, advanced economics report and assures readers who stick with it that it will reward them with deeper understanding and fresh insights.
Showing reviews 1-5 of 30
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