Category Archives: History

The great inflation of the 1960s

 

No, I don’t mean price inflation.  Rather this will be a sort of stream of consciousness on the explosive change of the 1960s.  I’m using “inflation” in the cosmological sense—when things suddenly change really fast, and then slow again.  To take one trivial example; is there any doubt that the speed and complexity of change in the pop music sector accelerated sharply after 1963, and then slowed again in the 1970s and 1980s?  (Maybe there is, and I’m just a deluded boomer.)

Patrick Sullivan sent me the following amazing video from 1965.  (I still can’t get the hang of “embed.”)

Since I’m a right-winger, and thus racist by definition, it took me about 4 or 5 minutes to realize how absurd this video really is.  Yes, that’s exactly how I remember Michigan when I visited all-white areas in 1965, but Detroit was already more than 1/3 black by that time.  The fact that blacks were totally ignored in the video surely tells us something about what went wrong.  And the speed of the change was breathtaking.  The Detroit race riots (among the worst in American history) occurred just two years later.  By the early 1970s Detroit was rapidly becoming a bad joke.  And I mean “bad joke” literally, people would make jokes about Detroit with strong racist implications.  And yet it’s hard to say how important the riots were.  The demographic changes occurred both before and after, and the 1992 race riot in LA doesn’t seem to have impacted that city’s development.

The great America boom of 1961-69 also saw an explosion in violent crime, as rising prosperity and sharply falling poverty rates had exactly the opposite effect from what liberals predicted.  That played no small part in the rise of conservatism in the late 1970s.  The Economist reports (in an excellent story) that crime rates are now plunging all over the world, despite the lousy economy in recent years.

No matter how old I get, I still think of “before and after” in terms of the late 1960s.  Attitudes toward race, women’s rights, sex, formality in clothing, politics, film, music, etc., all changed very fast.

In the 1970s I was greatly influenced by a book on China by Simon Leys, called Chinese Shadows.  I learned that things can be very different from how they seem, or how they are perceived by most experts.  Leys was ostracized in academia, where most China experts had a positive view of Mao.  Of course that doesn’t tell us which conventional wisdom will be wrong today, and in which way.  Is the superficial prosperity of Shanghai just a glittering facade, about to collapse like Detroit in the late 1960s?  Or is the conventional wisdom (in the blogosphere) that China is a bubble wrong?  Might China successfully become a developed country?

Time will tell, but the Detroit video is a reminder that change can come very fast, and in very surprising directions.

PS.  Conservatives are at their best when they are on the fringes, attacking liberal orthodoxy.  Leys was a very nuanced and subtle writer.  Unfortunately conservatives get sloppy and overconfident when they gain the upper hand.  In 40 years we’ve gone from Simon Leys to Fox News.

PPS.  This piece in the NYRoB makes a very persuasive claim that 1979 was the key turning point.  Perhaps that was the year that the explosive change of the 1960s led to a backlash.

Not merely did the experts not have the faintest clue about the series of turning points that were in store. In most cases, they would have struggled to identify who would be the leading actors in those turns. How could they? Only five years before 1979, Deng Xiaoping was in disgrace and living in a tractor repair shop, on the run from the rampaging Red Guards. The Ayatollah Khomeini was in exile in Iraq, soon to be shunted on to the Paris suburb of Neauphle-le-Château. In Britain, Margaret Thatcher was a rookie education minister, familiar to the public only as Thatcher the Milk Snatcher for having deprived younger pupils of free school milk. She had been promoted to the Cabinet mostly because she was a woman; the prime minister, Edward Heath, despised her as a garrulous nuisance. Karol Józef Wojtyła was archbishop of Cracow. The chances of his becoming the first non-Italian pope since Adrian VI in 1522 seemed slim. . . .

What had taken hold at a deeper level was the idea that we were living through “late capitalism.” It is remarkable how many economic classics of the 1930s and 1940s had predicted a short shelf life for capitalism as we knew it. Although no longer a Trotskyist by then, James Burnham in The Managerial Revolution opined that “the capitalist organization of society has entered its final years.” John Maynard Keynes predicted “the euthanasia of the rentier” and the disappearance of shareholder capital. Joseph Schumpeter predicted that, faced with the increasing hostility of the legislative and administrative environment, entrepreneurs and capitalists would eventually cease to function.

With the ground so thoroughly prepared, it is not surprising that the claim that the Soviet system would soon bury ours should find such a receptive audience. Nor was the admiration for the achievements of a state-led economy confined to the Communist world. The admiration extended to the shah’s Iran as well as to Honecker’s East Germany.

There was, besides, an unconsciously patronizing assumption that, while Westerners might be inclined to “possessive individualism,” most people in the second and third worlds were more collectively minded. The Chinese were thought to be especially well adapted to real socialism, and there was much fascination with the progress of Mao’s great experiments, as shown by the success of William Hinton’s book Fanshen and David Hare’s play drawn from it. The go-getting behavior of the overseas Chinese seemed to have escaped notice.

In retrospect, what is so startling is the breakneck speed with which the mainland Chinese took to the market once Deng let them off the leash. As Caryl writes, only two years after Mao’s death Deng became supreme leader and was telling his confidant Yu Guangyuan that “we must work in the spirit of Meiji Japan and Peter the Great.” In no time at all, 98 percent of peasant holdings had in effect gone over to private operation. Throughout the 1980s China’s economy grew by nearly 10 percent a year. Today the percentage of economic assets in private hands in China is higher than in some European countries. With all China’s internal repression (on which it now spends more than it does on external defense), this was a genuine leap forward such as the world has seldom seen.

By contrast, the belief that the free market might still have something to offer stagnant economies was rather slower to take off in some Western countries. In Britain, the conventional belief remained that the nationalized industries were simply too entrenched to be disturbed. The constitutional expert Sir Ivor Jennings had pronounced that the labor unions were now an inviolable part of the British Constitution. Nor was it thought practicable any longer to run a modern economy without some sort of state supervision of prices and incomes. Reform of all these things might be desirable, but it was “politically impossible.”

Almost nothing that Margaret Thatcher advocated to the contrary was novel; many of her arguments had been anticipated by Conservative spokesmen opposing the 1945 Labour government. “During her first prime ministerial campaign,” Caryl writes, “she was known to cite the Australians, the New Zealanders, and the Scandinavians who had already started comparable reforms in their own countries.” What was fresh was her zest, her optimism, and her sense of possibility. She was fortunate at coming in just at the moment when almost everyone felt that the nation had run out of road.

Read the whole thing.

PPPS.  Speaking of 1979, this video is a great example of Robin Hanson’s recent claim that in the modern world it’s the singer and not the song.  And when did that change in music occur?  In 1965 . . . how does it feeeeelll . . .

The great inflation of the 1960s
ssumner
Sun, 28 Jul 2013 21:36:57 GMT

On the Missile Crisis

From Economic Principles

Share/Bookmark

The /Real/ Club of Rome Turns Forty, in Vienna
admin
Sun, 28 Oct 2012 20:01:59 GMT

Fifty years ago this week, the United States and Soviet Union came closer to nuclear war than anyone, including John F. Kennedy and Nikita Khrushchev, knew at the time. On Friday, October 26, at the height of the Cuban missile crisis, a US destroyer dropped practice depth charges, the size of hand grenades, on a Soviet submarine, whose rattled commander may have prepared to fire a nuclear missile, before being overruled by his onboard commodore.

The explosive devices were intended to be signals to surface, but the submariners didn’t know about that. Defense Secretary Robert McNamara had unilaterally altered the rules of engagement without telling anyone. The next day, Soviet missile technicians shot down a U-2 reconnaissance plane overCuba. That was enough for Khrushchev. Seizing on a suggestion in a Walter Lippmann column, he agreed on Sunday to recall the nukes and call off the crisis, in exchange for a secret promise to withdraw some US missiles from Turkey a few months later, and also a promise not to invade Cuba.

Hard Times Come Again Once More?

 

I keep a couple of books on the shelf above my desk to remind me of how much things have changed over the past hundred years. One is Only Yesterday: An Informal History of the 1920s, by Frederick Lewis Allen, which first appeared in 1931. The other is The Great Leap: The Past Twenty-Five Years in America, by John Brooks, published in 1966. Some crackerjack journalist is surely working today on a similarly successful treatment of the as-yet hard-to-characterize years since 1966. In the meantime, The Good Life and Its Discontents: The American Dream in the Age of Entitlement 1945-1995, by Robert Samuelson, takes the story forward.

The really interesting question, though, has to do with what to expect in the next twenty years.

One thing that Yesterday and Leap have in common, a characteristic that in all likelihood will be shared by the book that eventually joins them, is that there are hardly any numbers in them – nothing to link together the two  epochs, or to foreshadow the future.  Measurement is the province of economists. Compelling journalism seldom has time.

Therefore I have been reading, with special interest (and a certain dread), Is US Economic Growth Over? Faltering Innovation Confronts the Six Headwinds, by Robert J. Gordon, of Northwestern University.  In fact, I read it last summer, even before it was a National Bureau of Economic Research working paper, since Gordon is a friend. It’s a short report (25 pages) on an ambitious work in progress.

Beyond the Rainbow: The American Standard of Living Since the Civil War, a book version of the article, already long in preparation, will be anything but brief when it’s finally done. It will, however, be the definitive survey of American living standards over the last 150 years. (Think Carmen Reinhart and Kenneth Rogoff, This Time Is Different, on the history of financial crises.) It will formulate an educated guess about the future as well.  And since that prediction has implications for anyone following the election campaign (and more than just them!), there is good reason for considering it now.

The standard assumption is that, after the disruptions of the financial crisis, and once various fiscal imbalances have been resolved (pensions, health care obligations, etc.), the United States will resume the real per capita GDP growth of around 2 percent a year that we’ve enjoyed since 1929.  In the immediate aftermath of the crisis, I toyed with it myself.  Technology, the growth of knowledge, will see us through.

What if it won’t?

Usually we get our forecasts of technological progress from magazine writers and futurists; they come and go. Gordon, on the other hand, IS a well-regarded economist, author of a popular introductory macroeconomics text now in its twelfth edition; a historian of the Phillips Curve; member of the NBER business cycle dating panel; editor, with Timothy Bresnahan, of The Economics of New Goods. In recent years Gordon has turned towards economic history: his current project goes back to Interpreting the “One Big Wave” in U.S. Long-Term Productivity Growth; he teaches a popular freshman seminar, Did Economics Win  the Two World Wars?

There are two sides to Gordon’s argument, cosmic (by economists’ standards) and concrete, both of them rooted in standard practices of growth accounting. After a windup on the “super-long run” since the year 1300, he settles down to the analysis of three industrial revolutions that have occurred since the eighteenth century. These clusters of innovation should be understood as a series of discrete inventions, he says, adopting a familiar schema, followed by incremental improvements which ultimately tap the full potential of the original breakthrough

Thus the first industrial revolution, between 1750 and 1830, created steam engines, cotton spinning and railroads.  The second, with its three central technologies of electricity, the internal combustion engine and running water with indoor plumbing, occurred in the relatively short interval of 1870-1900.  And the third, associated with the computer and the Internet, began around 1960 and reached a climax in the late 1990s.

In each case, the innovative process brought improvements that, by their nature,  “could only happen once.” The first two revolutions required about a hundred years each for their full effects to work their way through the economy, says Gordon; the benefits of the second industrial revolution were still producing gains in the 1950s and ’60s, in the form of air conditioning, home appliances and the Interstate Highway System. Only in the 1970s did productivity growth slow.

The third revolution, based on information and computer technology, happened more quickly, according to Gordon. Computers took over much clerical labor in the ’70s and ’80s; since 2000, attention has centered on smaller and smarter devices for communication and entertainment, but not ones that contribute the kinds of gains in labor productivity associated with earlier surges in the standard of living.

The audacious idea that economic growth was a one-time-only event has no better illustration than transport speed. Until 1830 the speed of passenger and freight traffic was limited by that of “the hoof and the sail” and increased steadily until the introduction of the Boeing 707 in 1958. Since then there has been no change in speed at all and in fact airplanes fly slower now than in 1958 because of the need to conserve fuel.

Other one-time-only changes included the transition from animal to machine propulsion that freed the city streets from disease-causing animal waste; from outhouses to indoor plumbing; from housewives carrying buckets of water, coal, and wood into the house to the modern world of running water and sewer systems; from interior cold and heat to uniform indoor temperatures made possible by central heating and air conditioning; and many more one-time-only inventions. This may seem obvious about horses, outhouses, speed, and temperature, but once you accept that, you’re drawn into the central theme of this article: economic growth may not be a continuous long-run process that lasts forever.

What about the biomedical revolution that seems to be in the offing?  We are a long way from being able to measure the effects of these transformative technologies – other economists call them general purpose technologies, or GPTs – much less predict their arrival.  But even without the technological forecast, the prospects for US growth are somewhat daunting. New technologies take root quickly around the world, though various nations face different impediments to their adoption. The US is facing its own particular combination of “headwinds” of its own.  Gordon lists six:

1. A “demographic dividend” that boosted measured growth between 1965 and 1990 as women entered the workforce is now reversed.  Baby boomers are retiring, and with hours per capita declining, output per capita must grow more slowly than productivity.

2. A stubborn plateau in educational attainment is slowing growth. As the cost of education increases disproportionately, low-income people stay away from college altogether.

3.  Rising inequality is becoming a serious problem having to do with “us” and “them.”  The top 1 percent captured 52 percent of the income gains from 1993 to 2008, he notes; the other 99 percent saw its household income grow just .75 percent per household per year, or nearly 0.5 percent less than reported growth for the economy as a whole. Never mind the happy few:  slower growth for the 99 percent is slower growth.

4.  The interaction between the information and communications technology revolution and globalization is especially damaging to the US.  Outsourcing will continue.  Jobs tend to flow to where wages are lowest.

5.  Coping with climate change will take a toll. Higher carbon taxes will mean less consumption, while China and India continue to grow.

6.  Paying down all that debt, household and government, will constitute a drag on normal growth as well.

To what does all that resistance add up?  Gordon undertakes some simple but alarming arithmetic – an “exercise in subtraction,” he calls it.  He begins by bracketing the first half of his article – the proposition that there may be no boom on the horizon with the productivity-enhancing heft of the Internet to give us growth anything like that of the last twenty years.  Instead, he takes the record of the years since 1992 – 1.8 per capital real GDP per year – and supposes that it somehow will be repeated.

Then he subtracts the estimated effect on that growth of each of his headwinds.  Two-tenths here, each, for demography, education, globalization and climate; five tenths there (that dramatic increase in inequality); three-tenths for paying down debt: all that adds up to 1.6 percent less growth per year over the next twenty years than in the past, or a shocking 0.2 percent per annum.  What kind of US politics will that make?  (Gordon’s remedies mostly have to do with dramatically opening up immigration.)

Not everyone who has heard Gordon’s analysis is persuaded – or even intrigued. Not everyone loves a growth accountant. And Gordon acknowledges that technological change is notoriously difficult to forecast.

But the “one big wave” analysis of Gordon’s Beyond the Rainbow project is slowly growing more persuasive. Its implications for the future seem dire, totally at odds with the Tea Party’s Club for Growth or the George W. Bush Institute’s Four Percent Growth Program (let’s just have 4 percent real growth for a dozen years or so, with no statement of how). David Brooks, of The New York Times, pressed for time, last week pulled a Bloomberg Businessweek off the pile and wrote a column (Temerity at the Top: in praise of the top 1 percent)  about how serial entrepreneur Elon Musk (Paypal co-founder, SpaceX commercial rocket buff) is working on something he calls a Hyperloop. “a tube capable of taking people from downtown Los Angeles to downtown San Francisco in thirty minutes” and hopes, too, to open a space colony on Mars “in ten for fifteen years.” Brooks concluded: “A few ridiculously ambitious people can change an economy more than any president.”

In his NBER paper, Gordon raises the specter of those four centuries of negligible growth that unwound before the first industrial revolution rescued Great Britain from a Malthusian crisis. That’s a little remote for my taste. When I was done with his article, I settled for the McGarrigles’ rendition of a Stephen Foster song about the years before America’s Civil War, “Hard Times Come Again No More.” (The lyrics, worth reading, are here.)  If Gordon is right, the hard times are just beginning. They are manageable; the US is a rich, sturdy and good-hearted nation. But the 4 Percent fantasy must be dismissed first.

Share/Bookmark

Hard Times Come Again Once More?
admin
Sun, 23 Sep 2012 19:42:42 GMT

Tom Rick’s Question: Was John F. Kennedy the flat-out absolute worst U.S. president of the 20th century? – By Tom Ricks | The Best Defense

Was John F. Kennedy the flat-out absolute worst U.S. president of the 20th century? – By Tom Ricks | The Best Defense.

The case he makes seems persuasive to me.  I think you could make a pretty  case for Lyndon Johnson, Richard Nixon or George W. Bush as well.

FDR:  Social Security, greatly reduced poverty among elderly citizens, won WW II that if lost would have untold negative consequences, and helped establish a framework of internationalism that avoided another world war, and secured post war prosperity.

Truman:  Helped win the war established containment of the Soviet Union.

Eisenhower:   Continued to successfully prosecute the cold war, and created the interstate highway program.

Kennedy:  As noted in the link stumbled from one disaster to another and began our involment in Vietnam.

LBJ:  A good contender for the worst.  He started the inflation that was part of stagflation in the 1970’s, but he also passed the civil rights act of 1964.  That likely keeps him out of contention.

Nixon:  Only President to resign would likely put him in contention, along with dragging on Vietnam.  The opening with China is a big deal, but it might have happened anyway.  He also began the stagflation of the 70’s He’s in contention.

Ford:  I think his pardoning Nixon did the country a big favor, and likely cost him re-election.  He’s not in contention for the worst at all.

Carter:  I think he deserves a lot of credit for the camp david peace accords that has prevented another Israel-Egypt war.  He’s not in contention.

Reagan:  Contributed to an economic climate that broke the back of stagflation and won the cold war.  A good to great President.

Bush I:  Helped balance the budget.  Won the first Golf War and kept it goals clear and achievable, unlike his son.

Clinton:  Didn’t muck anything up big time and allowed good times.  Not great, not awful.

Bush II:  Was faced with unprecedented challenges.  If he’d kept his focus on a quick victory in Afghanistan and had declared war in Iraq with insufficient thought and evidence he might have been a borderline good President.  But with an un-needed war, that was amazingly mismanaged, ending his term with a massive recession, nominating and then withdrawing an obviously unqualified candidate to the Supreme Court, I think he comes off as just not up to the job.

Obama:  Not a radical as his many critics insist.  However, he does seem disengaged much of the time.  He hasn’t come up with a formula to recover from the Bush recession.  If health care reform is modified and used to come up an improved system over the status quo in more availability, but lower cost, that would be a great achievement.  Whether THAT happens remains to be seen.

American Empire: Do We Still Live in a Uni-Polar World?

 

alt

Photo: Medioimages/Photodisc

This week’s Lexington column in The Economist discusses the eagerness of some people to brand the U.S.’s bilateral, backseat role in Libya as evidence of an Obama Doctrine. Libya hasn’t defined an Obama Doctrine, The Economist argues, so much as “repudiated an old one.” The old one being the Powell Doctrine, the centerpiece of the two-decade (and counting?) era of U.S.-led unipolarity, following its half-century Cold War period of bi-polarity with the Soviet Union.

Now, with the Group of 20 set to replace the Group of 7, there’s debate among political economists about what sort of global power structure will emerge next, or if we’re already in one. An obvious possibility is a bi-polar system between the U.S. and China. Richard Haas of the Council on Foreign Relations believes we’ve already entered into what he calls an age of non-polarity, in which nation-states compete with non-state actors for power: multi-national corporations, NGO’s, terrorists. That’s certainly close to what’s playing out in Libya. The first country to act was France, with its sizable oil contracts in Libya.

The closest thing to Haas’s vision of non-polarity in the last century was Europe during the lead-up to World War I. France, Britain, Germany, and Russia struggled for power — just as the British Empire was fading from the height of its Pax Britannica — which actually marks the last time a uni-polar global hegemony existed.

American Empire: Do We Still Live in a Uni-Polar World?
Freakonomics
Thu, 07 Apr 2011 18:30:07 GMT

The real 1970’s

A new site has appeared devoted to bashing 70’s nostalgia. I support this as I now hear the 70’s portrayed as carefree, but I sure don’t remember it that way. (Watergate, stagflation, changing morality, so on) People always want to think they face problems that are more challenging than those of their parents and grand parents. I think that’s nonsense.

From the site:

Hey, it’s an unfinished site with only one thing on it! That must mean it’s in “beta.” But since there’s a lot of content in that one link, then it’s maximum beta – or, to make it really super 70s, “Betamax!” Ha ha. Can I write for the Hudson Brothers’ Summertime replacement variety show now?

Don’t know who the Hudson Brothers were? We’ll get to that.

There’s a notion in the minds of some that the 70s were a carefree time, cool and kitschy and fun! and innocent, in a peculiar fashion. It was not. For one thing, there was peculiar fashion. For another – well, consider this site a brief against the nostalgia that inevitably attends any bygone time. Every era has its good points and regrettable trends, but for sheer idiocy, ugliness, meretricious music, televised banality and general malaise the 70s are unparalleled.

Trust me on this. I was there.

Top 10 Greatest Presidents

I’d rank Carter much higher, but I’d agree with a lot of the rest of this ranking.  I think returning the canal zone was the right thing to do, irrespective of the”realpolitik” perspective.

ProfessorBainbridge.com

via Top 10 Greatest Presidents.