excess of a negotiated figure would have to be distributed in part back to the public in the form of lowered prices, and then, following a reasonable formula, to shareholders and to employees \(management and incentive pay. Accounting procedures would have to be carefully monitored. Without some such mandatory policy, prices may never settle down in time to cool off the economy; all sectors now plan on the assumption of inflation, and such planning, by fulfilling its own predictions, can build up into a force seemingly as unstoppable as nemesis or gravity. It is hard to envision even the most enlightened of corporations deciding unaided in favor of lowered prices and against increased profits. They are bound to pay off their stockholders, even if they are faceless. Government is unlikely to interfere with corporate profits and policies except through increased taxes which can also have inflationary effects. Under the circumstances only unions seem to be in a position to begin to turn the tide. Their leverage on corporations, if exerted in the public interest, could produce a first step toward stabilizing prices. Genuine and equitable tax reform would have to accompany any such initiative. In order to make these demands, labor would have to display great restraint in asking for wage increases and other benefits. Union members and leaders have become so much a part of the economic system and of the status quo that it is difficult to imagine them deciding on such a course. And if they did, corporate management would vigorously resist any such invasion of their privileged domain. It would be a healthy and revealing fight. The odds against this proposal are obviously enormous. But the possibility is there, and few alternatives present themselves. President Ford’s economic summit convoked recently presumably assembled the best economic brains in the land; it produced only mummified proposals. George Meany speaks out in unmistakably defiant tones. The only trouble is that he has no more to suggest than the President himself. The crisis of leadership has almost transfixed us. The only way to break out of the spiral is for a powerful group to make personal sacrifices for a definite purpose in the public interest. Unlikely as the idea may sound at first, organized labor may be in a better position to do so than corporate managers, elected office holders, or the unpredictable herd of private investors. There they are: jeremiads and crackpot proposals. In the shuddering economic crisis we have now entered through our own actions, we cannot afford to brush aside any seriously advanced idea, not even if it flies in the face of deeply ingrained cultural and social habits. Furthermore, the real enemy lurks beyond the range of these two proposals. His name is waste planned, systematic, institutionalized improvidence with all our resources and energies. In 1830 de Tocqueville found the democratic merchants of America “heroic” in their efforts to conquer new markets. That system has now become demonic, seemingly bent on self-destruction. It will take time and an enormous wrenching of mind to bring us to our senses. Citizens will have to do far more than drive 15 miles per hour slower and plant vegetable gardens. Most of the following story originally appeared in the February, 1974, issue of The Washington Monthly. Parts of it have been reworked by the author. Ed. Austin This fall’s elections were only the most recent bit of evidence for a trend previously indicated by the price controls of 1971, the oil embargo of 1973, and the inflation of 1974 and forevermore: that economics is now the main event of the political battleground, and will be until some fundamental kinks are straightened out. If that is so, it suggests that the “crisis politics” of the 1960’s will be followed by a quieter but more genuinely frightening “crisis politics” of the 1970’s, as the wise men of Washington, Wall Street, and the scattered outposts of academia try to figure out how to save us from worse inflation, more widespread unemployment, and the variety of Malthusian horrors with which we have recently become so familiar. If the panicked mood that prevailed in America a year ago, when the gas-ration tickets were being printed up, has slightly abated, that is only because we have grown accustomed to chronic economic disruptions at home and humanitarian disasters abroad. None of this is a prescription for a stable and happy body politic. Even now, with a few dozen months’ experience under its belt, the government shows few signs of understanding how to deal with the upended economic world. From the commodities exchange in Chicago to the conference halls in Rome, it has become clear that food is the next great strategic weapon, which must be handled as carefully as, if more charitably than, the older sort of strategic weapon. Yet through most of the last two years agents from American food interests were knocking on doors in Frankfurt and Florence, trying to unload our goods on the European market. This is not even to mention our government’s wonderful sales efforts in Moscow. Of course, you can hardly blame the government or the businessmen for their lack of clear purpose when the advice they get is so fragmented and confused. From the one side come the voices of the We will have to mount an imaginative attempt at mutual reeducation to expel the subtle demon of waste from our thinking. We cannot do so without leadership, little of which has declared itself so far. Honest unfearing journals everywhere will be essential. Happy anniversary, Observer & Co., from the Texas of my mind. And keep hammering. Depression, preparing to roll out the mummified Lord Keynes to save us from slack demand and unemployment. From the other come the warnings that we already have too much demand, for everything = cf. the Club of Rome and its report, The Limits to Growth. As Jason Epstein wrote several months back, Even with unusually high levels of employment and production, the world-wide demand for goods continues to exceed the foreseeable supply and no prophet has yet argued convincingly that the situation will change. Though the world-wide industrial machine is running at nearly its full capacity, the result is not the much anticipated conquest of want; it is the threat of eventual depletion as goods of all kinds grow scarce. This is an almost unimaginably far cry from the economic wisdom of a decade ago, when the war industries were ‘defended as a means of propping up demand, and tax cuts and public spending were the planners’ most important tools for coping with recession. From the Affluent Society we have come in the twinkling of an eye to an apparent Age of Malthus, or if not that, at least an Age of insanity. What is going on? ONE PLACE to start is with the two most obvious trends which have typified the development of the American economy during this century. One, of course, is the mechanization and automation of most productive activities. At the start of the century more than 65 percent of the labor force was engage.d in agriculture or other manufacturing work. Now only one in three workers is involved in directly “productive” work 4 percent in agriculture, 6 percent in construction, and 23 percent in manufacture. After World War II the United States became the first country ever to have more than half its work force employed in the “services” sector that range of activities which includes enterprises as simple as barbershops and domestic servants, and as complex as education, transportation, and government. December 27, 1974 61 A primer on the economy By James Fallows
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