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.
Deregulating stockbrokers should be on your list. The changes in the finance sector should be there also. Banking was a staid safe occupation that paid well, but not exceptionally post WWII until the changes in the 70s, 80s and 90s. I would also think that the starve the beast idea has had negative long range impact. Looking back on it, how could we not realize that in order to cut spending, you need to cut spending not revenue? The increased addition of women into the work force should probably enter the equation in some manner. The overthrow of the shah too.
Steve
Despite all of the attention it’s received I think that Gramm–Leach–Bliley was a lot less important than the Depository Institutions Deregulation and Monetary Control Act of 1980 in that regard. Without it I doubt we’d’ve had banks that presented systemic risk.
I don’t think the overthrow of the Shah was particularly important economically and the overthrow itself was not nearly as important as the failure to do anything about it.