The Zero-Sum Society: Distribution and the Possibilities for Economic Change
Not many will think that government economists and economic advisers have much distinguished themselves of late, but they have succeeded, quite remarkably, in making themselves and their principals ridiculous. This they have accomplished by a combination of innocent hope, repetitive banality, and uncomplicated fraud. The economic system is behaving badly. A high rate of inflation is combined with high unemployment that is appalling among young, black central-city, and other vulnerable people. All effective remedial action requires energetic public steps, and for some influential groups somewhere in the polity some sacrifice of prospective gain.
The Administration yearns not to inflict such loss and to hear that it is not necessary. So it has become the priestly and deeply unworthy function of the advisers—economists and business statesmen—to explain that inflation and unemployment can be mitigated without loss to any influential group, to counsel symbolic as distinct from real action and, if something real must be done, to propose or agree to the line of policy that arouses the least influential line of protest. In practice, this means monetary policy combined with whatever fiscal action is most damaging to the inarticulate poor.
Finally, having urged and accepted what won’t work or what is ineffective or reactionary, the public economist predicts that inflation will eventually subside while holding that the present or prospective rate of unemployment is or will be tolerable and therapeutic.
All of this is drawn from life. President Jimmy Carter’s most recent anti-inflation measures were, with one major exception, all simulated or symbolic. No minimally competent economist could suppose that a minuscule reduction in public expenditures, a small increase in gasoline prices, some cosmetic action on credit cards coupled with a promise of strong resistance to firm legal restraints on the wage/price spiral could have any substantial effect on inflation. Those economic advisers who urged or acquiesced in this were showing not their incompetence—none is that bad—only their preference for public office as opposed to professional reputation.
Monetary policy, as noted, is the one acceptable line of action that does have economic effect. Support of this has an especially dubious professional aspect, for such policy is presented as socially neutral. In fact, as all by a little thought can discover for themselves, it is both egregiously regressive and remarkably uncertain in result. Monetary policy works as it limits spending from borrowed money. Thus it has its prime effect on those firms and persons which depend on borrowed money. It is untroubling to the big corporation with earnings to reinvest and which, in any case, is first in line at the banks. It works against inflation only as it creates a recession or depression, the timing and depth of which no one can predict, although this has not prevented numerous scholars in and out of government from pretending, perhaps even believing, that they can. Predictions of a recession that did not occur were professionally endemic all last year.
Monetary policy is, in fact, acceptable only …