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We know what we need and it's the domestic economic politics of the West of the 1940s to early 1970s (might be nice to end imperialism, too).

Minsky's 1986 Stabilizing an unstable economy contains an economic history of the US 1945-1985. His analysis is that what made 1945-65 special and stable was that the private sector was stuffed with US treasury securities as a result of the enforced savings and investment of the war economy, and it took 20 years to unwind those government bond holdings. Then after roughly 1965 financial innovation started out of necessity since banks couldn't do their business just shuffling US treasuries. And then financial crises hit every 5 years or so, until now.

So it may not just be the political economy - maybe you couldn't pull it off with today's balance sheets.

Incidentally, Minsky dates the start of stagflation well before peak oil in the lower 50 US states (he doesn't mention peak oil), which means that maybe stagflation wasn't only or even primarily about resource constraints, as many of us here appear to believe.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Sun Jun 6th, 2010 at 02:43:09 PM EST
[ Parent ]
Another factor was that from the end of the war until perhaps the middle '60s, American manufacturers had a ready made market for practically anything they could produce while Europe and Japan rebuilt their war-ravaged economies.  And I think it is no accident that, from about the mid '60s on, European and Japanese companies began to out innovate and out compete the Americans with newer, more modern facilities and newer, more modern management structures.  Deming tried to sell Total Quality Management to Detroit first and got no traction whatsoever.  They were entirely too fat, dumb, and happy with the status quo.  The Japanese, on the other hand, bought into TQM wholesale.  The rest, as they say, is history.

We all bleed the same color.
by budr on Sun Jun 6th, 2010 at 03:34:50 PM EST
[ Parent ]
Business leaders are as a rule pretty short-sighted, and don't do a good job of long-term business mgmt. The Japanese learned this in the run-up to WWII, and their excellent economic growth is a result of govt planners forcing long-term and 'quality' thinking onto their industrialists. So, the Japan story isn't about 'Japanese manufacturers' discovering Deming and saying, "Hey, this guy's got it going on, let's all do what he says." The guiding hand of the Japanese state was critical to forcing Deming's ways onto the Japanese.

I think the story in very general is quite similar in the post-war Western Europe economic success story.

fairleft

by fairleft (fairleftatyahoodotcom) on Mon Jun 7th, 2010 at 06:51:13 AM EST
[ Parent ]
I don't know this as well as I'd like - I put my academic career as a historian focused on the US in the 1960s on hold just as I was starting to investigate the economics of the era - but what I do know is that spending on the Vietnam War helped produce significant inflation across the US by 1967-68.

Lyndon Johnson refused to seek a tax increase to pay for the war, hoping to keep the war's impact from being felt by most Americans, and this apparently led to the inflation as well as screwing with the balance of payments system set up with Europe at the end of the war.

There's likely more to the story, but that's a piece. While we have a good understanding of economic policy history from 1980 to the present, it seems that the era from 1960 to 1980 is less well understood.

And the world will live as one

by Montereyan (robert at calitics dot com) on Sun Jun 6th, 2010 at 05:51:46 PM EST
[ Parent ]
of the West

I think the economic policies of the industrialized Western European economies (except Britain) after WWII are a much better model for how the the West should revive their economies. Deficit spend till full employment, for example. Have an incomes policy and understand that strong and nearly universal unions are an element of that. Lead, protect and encourage industry into high-employment and international quality production. There is no re-invention involved.

An important understanding is that whatever is done you will not get the growth rates of Europe recovering from WWII or the U.S. without much competition in the 40s and 50s, or of China over the last decade. Mature economies don't grow very fast, they're not where 'the market' wants to invest. So governments of mature economies have to force that investment.

fairleft

by fairleft (fairleftatyahoodotcom) on Mon Jun 7th, 2010 at 06:44:28 AM EST
[ Parent ]
Unions only really work in industrialised and centralised economies, where the same people work together, talk to each other, sometimes live near each other, and deal personally with the same management.

We need something like unions for the mobile, telecommuting, 'freelance', contractor temp economy that most workers live in now - including many who are supposedly middle class.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Jun 7th, 2010 at 07:19:50 AM EST
[ Parent ]
The "'freelance', contractor temp" 'economy' is actually a product in part of anti-union thinking. I don't think it's an attractive way of organizing the workforce, from either a productivity or 'worker welfare' perspective.

Union membership should be automatic, in the same way citizenship is.

fairleft

by fairleft (fairleftatyahoodotcom) on Mon Jun 7th, 2010 at 10:45:46 AM EST
[ Parent ]

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