- The Washington Times - Tuesday, November 18, 2008

REVIEWED BY JOHN R. COYNE JR.

As Robert J. Samuelson shows us in this crisply written and frequently witty study, politicians know little about economics, and economists know little about politics. When they think they do, we often get into trouble.

At times, economists sell politicians on their pet theories, much in the manner of the Wall Street operators who sold investors on complex investing schemes - as Warren Buffett called them, “geeks bearing formulas.” Political economists, like political generals, are to be viewed with suspicion.

At other times, politicians try to devise programs to deal with the economy during periods of unrest - former Presidents Lyndon B. Johnson and his “guns and butter” initiatives and Richard M. Nixon with his controls (“The history of Nixon’s controls can be quickly summarized: They worked; they weakened; they collapsed”), Jimmy Carter and the economic programs he developed himself to deal with the “malaise” of our national spirit (When discussing inflation, “President Carter often seemed forlorn”).

In these cases, the results were disastrous, with each successive political attempt to deal with economic problems pouring more kerosene on the fires of inflation, which raged from the 1960s to 1979. That inflation grew in intensity until it finally was extinguished in the first Reagan administration by a resolute president willing to subordinate political concerns to economic realities and a tough nonpolitical chairman of the Federal Reserve, Paul Volcker, who was given the president’s total trust and backing with a mandate to beat out that fire.

Beat it he did, and one result was the brutal recession of 1981-82, which brought on a political cacophony a less stalwart president might not have weathered. “Press coverage was murderous,” Mr. Samuelson writes. “On April 21, 1982, CBS broadcast a documentary by Bill Moyers, ‘People Like Us.’ It condemned Reagan’s policies for letting Americans slip ‘through the safety net,’” and as Reagan biographer Lou Cannon pointed out, “set the tone for television coverage” - coverage, he might have added, tarnished and distorted by unthinking bias, short on facts but long on emotion. But then, what else is new?

Nevertheless, despite the media din, the alliance of a president whose basic economic compass had been set by Milton Friedman but who pretended to no particular economic expertise and a hard-nosed economist who didn’t give a fig for politics finally succeeded in extinguishing the fires of the great inflation.

The story of the taming of inflation is by far the most compelling part of this book. “History is what we say it is,” Mr. Samuelson writes, arguing that the great inflation is as significant in our nation’s history as Vietnam, the assassination of President Kennedy, Watergate and Iraq as “one of the most important landmarks in the American story of the past half century.” There is a great story here, he tells us. But “history skimps on economics,” and as a result, “We are forgetting an important part of our past. It is time to restore this lost history.”

That is what he succeeds in doing in strong, clean, evocative prose. His secondary subjects, however - the aftermath of the great inflation and the future of American affluence - are less satisfying. The end of inflation, he says, led to a restructuring of American business - more productive, less worker-friendly and more globally focused - as well as stock-market and housing booms and bubbles.

All true, but there’s a problem. Timing can be everything, and the timing here is less than fortuitous. In May, Mr. Samuelson wrote that the book´s publication ” - about two years later than originally expected - is more timely now than if I had written faster and made my initial schedule … as I write this in the late spring of 2008, consumer prices are rising at about 4 percent in the United States and, spurred by higher oil and food prices, are rising even faster in some other countries.”

In May, the reappearance of inflation may have seemed alarming. It´s certainly true that politicians were shouting about gasoline prices and rhapsodizing about wind power and four-cylinder cars. Since then, however, oil prices have tanked, carmakers and alternative energy developers are going broke, papers are leading with stories about deflation, and some even are predicting the collapse of the world’s economic system.

That certainly isn’t Mr. Samuelson’s fault, and it in no way detracts from the story he tells so masterfully. Perhaps, though, it does suggest that with deadlines sharply in mind, he should start the next one very soon.

• John R. Coyne Jr., a former White House speechwriter, is co-author with Linda Bridges of “Strictly Right: William F. Buckley Jr. and the American Conservative Movement,” published by John Wiley and Sons.


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