Judith Stein’s Pivotal Decade: How the United States Traded Factories for Finance in the Seventies makes for depressing reading. Her narrative counters Whiggish histories of continuous progress with a sobering account of economic decline. It is a chronicle of poor decisions, written from the vantage point of a post-industrial United States with fractious politics and a surging deficit. Stein’s aim is to have us consider the 1970s through this lens of misguided economic decisions. The underlying problem was a widespread rejection of Keynesianism. The evidence she marshals is economic, but not through modeling or the tools of social science.
Stein argues that shifts in US policies in the 1950s and 1960s encouraged investment abroad, steadily increasing the trade deficit and placing American jobs and companies in harm’s way. As the 1970s took hold, economic policy was geared towards anti-communism, not domestic employment. An overriding fear of inflation limited fiscal creativity and the oil embargo and crisis shook the US severely and further undermined domestic industrialization. The Democratic Party lost its way amid a proliferation of special interests, forgetting the key function of Roosevelt’s New Deal: jobs. Domestic manufacturing was ignored and not protected. Stagflation furthered a departure from appropriate government intervention. By the time Reagan was elected into the presidency, deregulation and the undercutting of unions was seen by many voters as a welcome antidote to the failed policies of Jimmy Carter and the Democrats, who were beholden to special interests and identity politics.
Narrowly conceived self-interest, in other words, led to policy decisions with economic consequences, which in turn had political consequences. Overall, much of Stein’s thesis rings true.
The book, like many other works of economic history, wrestles with questions of causality. Stein’s chapters recount the economic and political consequences of decisions. Economics makes more evident the outcomes of these decisions, provided, of course, that we accept macroeconomics. Were Stein an economist, quantitative analysis would have driven the work. But instead, she offers up a chronology, a timeline of actions and outcomes marked by broad economic measures. What is in short supply, unfortunately, is robust historical exegesis.
Stein never commits to making political issues and alignments clear. Which economic factors drove what political decisions? And which political factors drove what economic conditions? At bottom we know that messy combinations of economics and politics provides the most accurate picture. Stein is a skilled historian. Had she provided more analysis of the political priorities of actors, the connections between their decisions and political outcomes, as well investigating their differing understandings of macroeconomics and political vision, the history of the decade would be more understandable. Instead, Pivotal Decade does not so much explain as describe.
We need better explanations. The questions of the 1970s, and in particular the processes that led to macroeconomic policy, are extraordinarily relevant today. Implicit in Stein’s work is a claim that high-level political thinking and action has profound, though not necessarily expected, impacts on the economy. Missing from the book is analysis of the political visions and values that framed the decisions and action.
One of the most important stories of the decade was the deep shift away from manufacturing jobs. The “new” economy, greatly shaped by finance, had a tremendous impact on the kind of jobs held by many Americans. We need not romanticize the shop floor to recognize that some manufacturing jobs, like some service jobs, offer clarity and concreteness. Employment in a postindustrial economy, a white-collar and pink-collar world, is more abstruse. This change in the nature of employment has profound implications for ways in which people understand their work, their economy, and their relationship with their government. Keeping that in mind, it is a challenge to make sense of competing visions of macroeconomic policy in a postindustrial world. We seek simplification and to reduce complex relationships to easily grasped homilies and metaphors that we can repeat to each other.
Political and economic leaders today are debating levels of taxation, fiscal stimulus, and deficit reduction. Economists challenge each other to provide more accurate economic models and predictions. None of this is the focus of families and college students. They are focused on finding reliable ways to find work and to make careers in a shifting and abstract macroeconomic environment. People seek jobs, compensation, and stability, of course, but most also want meaning and value through their work. They seek tools to navigate in this maelstrom. Rhetoric is only helpful in establishing simplicity.
As James Carville put it well – It’s the economy, stupid.
The challenge is not weighing the relative efficacies of competing economic theories or policies. Instead, it is addressing a difficult question: what sort of economy do we want? And if we have that economy, will it adapt to changing conditions? The answer to that question in the late 1970s was a turn to the right and the Reagan presidency. Answer it today and we will know much about America’s next decade.