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92 of 101 people found the following review helpful:
5.0 out of 5 stars
Beware of Keynesians, November 15, 2008
This review is from: The Great Inflation and Its Aftermath: The Past and Future of American Affluence (Hardcover)
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.
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38 of 40 people found the following review helpful:
4.0 out of 5 stars
If you like Samuelson's columns, you'll like this book, November 14, 2008
This review is from: The Great Inflation and Its Aftermath: The Past and Future of American Affluence (Hardcover)
Robert Samuelson is a journalist, not an economist. But his writing on economic issues makes him sound, to my ear, like an economist. Samuelson's columns in the Washington Post often catch my eye, and I have read many of them. Until I read this book and saw Samuelson's brief biography, I thought he was an economist.
But Samuelson has a way with words that marks him as a journalist. When I saw a Newsweek article by Samuelson based on this book, I thought the book worth a read. It is indeed. Samuelson looks to economic history, in particular the "great inflation" of the 1970s, for lessons that it teaches us about today's world.
In fact, Samuelson believes that the roots of the current credit crisis are firmly planted in the great inflation. That is, that the "disinflation" we grew to enjoy as the great inflation was brought under control led us into bad habits that have finally come to roost.
I won't summarize the book here. If you want a good summary, the Newsweek excerpt that Samuelson himself wrote does a better job than I can. The core of the book is there. To get much more, you have to read the book.
And I encourage you to read the book. Samuelson sometimes has the air of a didactic "know it all." Maybe that comes with the territory when you are a columnist (not a self-doubting profession) for both the Washington Post and Newsweek. That air can annoy -- it did annoy me a bit in this book. But it has not kept me from benefiting from Samuelson's work.
Be warned, though. Samuelson says he wrote this book for the general reader. Readers without an interest and some background in economics may find the book tough going. It's not a collection of columns. It's an in-depth economic history and analysis. At times it can be difficult. Even dry. I must confess that I skipped over parts that seemed not worth the trouble.
Yet I do recommend the book. There's little question that we face some troubled economic times. As Samuelson points out, much of it is perception rather than reality. Samuelson's book helps put the problem into an historical perspective. That helps. The main thing to fear may well be fear.
Fear can be deadly. Yet a book about cancer can sometimes help someone just learning that they have cancer deal with the fear. Learning facts and thinking logically can combat emotion. Reading about what we are facing as Americans, and learning more about the great inflation era, may help us shrug off the despair and get to work on the nation's financial problems.
Samuelson's book helped me do that. I hope the book will help other readers do that as well.
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28 of 30 people found the following review helpful:
5.0 out of 5 stars
Great Economic History, November 20, 2008
This review is from: The Great Inflation and Its Aftermath: The Past and Future of American Affluence (Hardcover)
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.
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