This week, BusinessWeek writer Chris Farrell reviewed The Great Inflation and Its Aftermath: The Transformation of America's Economy, Politics, and Society by Robert J. Samuelson. If you enjoy identifying the ways the current economic situation is reminiscent of past event in recent history (say, the Reagan era and the recessions between the late 1960s and early 1980s), The Great Inflation and its Aftermath will deliver all-too-familiar reminders of economic instability, federal intervention, and renewed faith in the American system of innovation and reconstruction.
Samuelson believes in the power of ideas, but he doesn't put much stock in the thoughts of economists. He says they peddle optimism instead of hard-nosed realism to an entitlement-besotted populace. Take the experience of the '50s through the '70s. Then, he says, economists sold the Keynesian notion that the business cycle could be fine-tuned into insignificance, wrongly assuring the populace and policymakers that the problem of unemployment could be solved. Instead, the country ended up with roaring inflation. The same over-optimism, many observers believe, characterizes the profession's embrace of deregulation and free markets. Want to see the effects of free-market prescriptions? Read today's headlines, they say. But Samuelson regards economists as having more power than they really do. Hence his worries about the reform ideas now gaining currency, including notions of how to bolster the economic security of the middle class, provide universal health coverage, and curb global warming. The fervor bothers him because it fails to account for the rising cost of the welfare state, enormous household debt burdens, and the "twilight of Pax Americana."Samuelson's book, as the reviewer says, "draws parallels between the Reagan era and today, but underestimates the power of U.S. innovation and resilience." Perhaps readers are feeling saturated by the clamor of economic woe and constant analysis. It's hard to say. What do you think?