A Growing Burden on the Workers

A central problem of the American economy has been its cyclical volatility. Swings of widening magnitude have dogged it since the mid-1960s. Industrial production—to take but one indicator— fell 12 percent in 1981-82, somewhat less than in 1974-75, but it persisted over a more extended period.

The drop repeated a steep if less extended decline in the spring of 1980. Furthermore, the cyclical peak in industrial production that was briefly reached in mid-1981 represented merely a shortlived recovery to levels last attained in early 1979. Whatever the “autonomous” sources of this volatility, it was primarily generated by monetary and financial policies, largely formulated by the Federal Reserve. Tightened credit was to bring about economic slowdown and raise unemployment, but political pressures eventually would induce stimulative fiscal and monetary measures, reinvigorating the economy and improving employment prospects. Thus there was a breach in the ruling con...