This book took me a long time to read, but in the scheme of things, I zoomed through 900 pages! Overall, William Greider surprised me with how progressive the writing was. It seems like wealth gaps are a primary source of economic inefficiency. P.371, referring to the 1929-30 Recession, “by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify reinvestment of their capital accumulations." This was fundamentally the explanation for why Reaganomics never worked, but I appreciated the technical viewpoint coming from an expert.
I loved the story of the how the Federal Deposit Insurance Corporation was created between FDR and Marriner Eccles. “It is only fair you should know that formidable opposition has developed,’ Roosevelt said, ‘However, I don’t give a damn. That opposition is coming from the boys whom I am not following,” (p.378.) We need more bold leadership. One of the lessons I learned from this book is that technocratic leadership is not always the best. “These analysts were said to be rational and disinterested in a way that democratic politics was not,” (p.651), and yet, the political pressures relayed by representations from the real economy were valid, real experiences of the Fed’s policymaking decisions. It is always important to consider technical, economic, 'hard data' in policymaking but, fundamentally our policymakers must be responsive to American's concerns. Politics has more of a place in policymaking than I fully realized.
To beat inflation, Volcker wanted wages to fall, just like the case right now with the Fed. But, as cited by a steelworker, “what’s happened in this economy is that higher wages have been busted down, everyone pushed down to a lower wage, even a minimum wage. Yeah there are people back to work, but what kind of money are they making?” p.721. Suicides were high. “Organized labor never really recovered from the recession,” (p.722). This was also a fundamental switch between parties where labor lost ground in the Democratic Party. This was discussed heavily in Stayin' Alive. Politically, Democrats now supported the Fed, Republicans returned to a semblance of populism and were far from a balanced budget, in fact, created a tremendous deficit and were unknowingly relying on Keynesian economics to kickstart the economy while preaching monetarism. Reagan deliberately fused nationalism and capitalism and basically was technically totally off base in economic policy.
Further, while inflation occurred, homeownership was an effective way to redistribute wealth from creditors to debtors due to the loss of value in real dollars of loans and mortgages. As inflation was curbed, the millions of middle class families who had been able to afford a home were now in deeper debt than they had signed up for. (p.679).
While the Fed seems technocratic and unfazed, their constituency is just different than everyone else's. The Fed's constituency, at this time, was not Americans, savings & loans, or small banks, but panicky bondholders. “In effect, the national government’s management of the economy was being guided by the self-interest commentaries from a few hundred thousand financial experts in Wall Street,” (p.631), aka, the bond market. Ultimately, “what was good for this affluent minority of citizens, of course, might or might not be good for the rest of the country,” (p.452)...it wasn't. We ended up concentrating money in the hands of the wealthy.
I learned a lot from this book but do wish the author explained more of the basics of economics. There really are a lot of parallels between now and the 1980s. Hopefully this time, working Americans come out on top. Thanks, Jeremy, for the recommendation!
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