Reading the James Kwak post that I responded to below has made me start thinking about turning points that have brought us to the situation in which we now find ourselves. I can think of a number of them and most occurred in the 1970s:
- Nixon’s price controls and suspension of the convertibility of gold (1971)
- Failure to address the problems created by Medicare and Medicaid when expansion of the healthcare system made the transition between increased utilization and plain old price increases (~1972)
- Failure to address the problems of excessive dependency on oil following the Arab Oil Embargo (1973)
- China’s abandoning its policy of autarky (1979)
- The Chrysler bailout (1979)
- Breaking up the Bell System (1984)
- China pegs yuan to dollar (~1994)
I could add a number of technological developments to this list, e.g. the IBM PC (1981) and the connecting of the NSFNET to MCI Mail (1987), and, as I’ve mentioned before, I think that demographic issues are absolutely central to the situation in which we now find ourselves.
Many of the items above have antecedents and are interrelated. So, for example, Nixon did what he did because Johnson had done what he had. Then there’s the enactment of Medicare and Medicaid in 1965.
Note that, unlike many people, I don’t think the issues of taxes and deregulation are particularly central to the problems we have. Rather I think that they’re responses to other more central issues.
Other suggestions? Questions? Disagreement?
I don’t think the final chapter on all of this has been written and, while I’m discouraged, I don’t think the future is necessarily a gloomy one. I do think that the problems we have now have been building for very long time, are likely to take a very long time to undo, and the incentives that are in place (particularly for our political leadership) make it unlikely that we’ll start taking the steps we urgently need to.