Transcripts For CSPAN3 Economic Growth After 1973 20170227

Let me acknowledge our partnership with the National History center and the american historical association. We are cosponsoring and coorganizing this seminar with. Let me acknowledgment our donors, the society of historians of American Foreign relations, the George Washington University History department as well as a number , of individuals giving support for this series. We want to acknowledge roger lewis, the cochairman of the seminar. Hes here all the way from texas. I want to welcome all of you and say thank you especially to pete and amanda perry who do the heavy lifting in terms of getting us here and organized. We are very grateful to you. [applause] thank you. Will turn i think i it over to eric to introduce our speaker. Thank you. One last technical announcement, if you have one of these devices, and i suspect everyone in the room does. If you could just turn it to vibrate or silence, that will prevent embarrassment and interruption in the next hour and a half. With that, it is my pleasure to introduce this afternoons speaker, Marc Levinson, who is an independent historian and economist living in washington, d. C. Hes a former finance director and editor of the economist and a Senior Member of the council on foreign relations. His previous books include the box how the shipping container made the world smaller and the World Economy bigger, one of the bestknown Business Books in recent years. He received a doctorate in history from the City University of new york. And today, he will be speaking on his new book. Marc levinson thank you very much. Welcome, everyone. Im very honored to be asked to present here on my book and im pleased all of you came. People have looked at 1973 as a sort of turning point. Here is what it looked like. Before 1973, in all the advanced economies, Economic Growth had been rapid improvements in living standards. Around the world, the economy grew at an average rate of 4. 9 from 1951 to 1971. At that rate, and economy will double in size in 14 years and quadruple in size in about 28 years. This is a world in which people can feel themselves becoming better off the day, by the year. Then, where you see the vertical line on the graph, everything changed. In the quarter century after 1973, the World Economy grew just 3. 1 per year. The decline was even sharper in the advanced economies of western europe, north america , and japan. To a remarkable extent, the outlined,s are just extraordinarily strong Economic Growth during the Third Quarter of the 20th century, much more ordinary performance during the Fourth Quarter are ignored in , the many political, social and diplomatic histories of this time. So is the fact that these trends transcended international boundaries, affecting every wealthy country and many developing countries. What i was trying to do with an extraordinary time is resent a new history of the second half of the 20th century from a perspective historians have largely ignored. Its important to remember the starting point here. Obviously at the end of world war ii, millions of refugees in japan and across europe filled the roads, build transit camp needed relief. , there was widespread destruction of infrastructure and capacity. In north america, there was no destruction of infrastructure but we had plans converted to war production that took a prolonged conversion back to peacetime production. And everywhere, inflation was a problem. Because there was Strong Demand for goods that had not been available in some cases since the 1920s. Beyond that, the economies in the postwar era were far from modern. It is hard to take ourselves back to that time now. This is an age at the end of most firms inhen this country and other countries lacked electricity still. Many urban houses still had outhouses. For americans, the home phone was usually a party line. And in other parts of the world, getting a home phone could take years if you could take one at all. It was a luxury good. Here is a statistic for you. In 1945 at the end of the war, there were 3. 1 million mules on u. S. Farms. Farmers were more likely to own a mule than to own a tractor. It was not just material goods that were much less than they are today. It was Living Conditions in many other ways. A woman born in japan in 1947 could expect to live to age 54. A man born in italy could expect to live to about 60. The first couple of years after the war ended were an Economic Disaster and many of you know this story. In the United States and canada, this time was known for labor conflict. In europe and japan, there were no currency reserves so governments did not have the wherewithal to import the most a basic products people needed for survival. Power plants could not generate power because there was no cold. Tractors cannot plow fields because there was no diesel fuel. It was a chaotic time economically. In 1948, things began to change. There were three factors that caused this. One was a shift of u. S. Economic policies. In europe, the United States brought in the Marshall Plan which helped stabilize currencies and provide Foreign Exchange so countries could begin to import the necessities to restart production. Had ann in 1948, we Economic Policy that became known as the reverse course. That was the idea that instead of punishing japan to make it pay for causing the war, we ought to help the economy grow to stabilize japan as a bulwark against communism and create a trading partner for ourselves. U. S. Economic policy was part of the change that happened in 1948. Second, there was the currency reform in west germany which was not unrelated to the fall of the iron curtain across europe in that year. Receipt of events had some important effects. It created a Stable Currency in west germany and allowed for the fundamentals of the market economy to begin. Until then, a lot of the Economic Exchange had been to through barter because there was no faith in the currency which was deliberately kept unstable by the russians who shared authority over it. The fall of the iron curtain over Eastern Europe turned to be positive for Economic Growth in the west. You can think of this as the russians walling themselves off. Then they had been , meddling endlessly in affairs in the west and other western European Countries. The iron curtain was a bit of a withdrawal. It separated east from west and made it possible for the west to grow. Then there was in 1948 the beginning of trade liberalization, the foundation of the general agreement on tariffs and trade and what became the common market. From those reforms, those firmer foundations, many countries began to grow. 1948 was the first year of growth. Many countries would grow economically straight through until 1973. There were literally countries that went more than a quartercentury without a recession. The west germans called this the economic miracle. The italians talked of the miracle. The french name for this time is the 30 glorious years. The japanese are more modest and talk about the era of strong Economic Growth. [laughter] levinson we tend to call it the golden age. The golden age was the heyday of economic planning. Economists had new ideas and built upon the work of John Maynard Keynes and some of the experience of the war about how to use the powers of government to provide full employment and steady Economic Growth. And naturally, perhaps, as economies around the world grew well in the 1950s as peoples incomes rose and unemployment stayed generally low, the economists claimed credit. One of these was walter heller, some of you may remember him as the chief Economic Advisor to president kennedy and president johnson. Shortly after leaving office, he gave a famous lecture at harvard in 1965 in which he claimed so far that the government knew how to adjust spending and taxes to maintain full employment without pushing up inflation. As he put it economics had , replaced emotion with reason. This notion that the economy was reasonable got a lot of traction. Emblemizedyzed this more than Carl Schiller. Hes shown here as the leader of the christian socialists in germany. He was a trained economist. He had eight doctorate in doctorate he had a in economics from before the war. His notion was that it was possible to maintain an equilibrium, steady Economic Growth, full employment, low inflation, and international balance. He referred to this ideal outcome as the magic square. Youve heard the four corners of it. His idea was that by adjusting macroeconomic variables properly, the government could achieve this magic square, could keep the economy in balance. Put schiller also understood in a market economy, the government could not achieve the magic square itself. There are seats over here if you would like. When he became west germanys economy minister in the Coalition Government that was formed in 1966, his experts produced fiveyear goals for each of the legs of the magic square. They had computing power, they had data and they spent a lot of time crunching numbers to figure out the optimal course for the German Economy over the next five years. And then, they brought together the captains of industry, the heads of the great labor unions, the heads of the trade associations. Board members of the central bank and ministers from the cabinet. In a room much like this they , sat around tables and Karl Schiller would advise them what they needed to do in order to make the magic square a reality. He would tell them if the unions would hold their wage increases x percent, if business would increase investment, if the finance ministry would raise taxes slightly on consumption and lower it on it investment, the economy would remain in perfect balance, everyone would have a job, growth will be strong west germans would be , happy. As you might expect, this promoted the general idea that the government had the power to assure prosperity for everyone. Unfortunately, this structure did not work out terribly well. The German Economy never did manage to perform according to the forecast of schiller and his staff of experts, but he tried. He was convinced the economy could be treated as a rational and could be made to act in an orderly way without the disturbances that interrupt life in unpleasant ways. Around the world, the good times continued to roll through 1973. 1973 was the peak year. The World Economy grew 6. 3 , 6. 6 , probably the fastest global Economic Growth recorded in a single year of all of human history. The average Unemployment Rate across 28 advanced economies was just 3. 2 . As the world headed toward the second half of 1973, the forecasts for 1974 were just as rosy. Inflation was a little bit of a problem, people said, but its not going to be a serious problem. We will have another year of strong growth. If you went into the minutes of the Monetary Policy of the bank of england or the federal open market committee, there were complaints everywhere about shortages, the lack of manpower, the lack of resources. The economy was going full steam and in the autumn fell the economy is going full steam. And then the bottom fell out. In egyptian and syrian armies october 1973, attacked israel. To raiseucers braced the price of oil and embargoed shipments to several countries including the United States and the netherlands. Initially, this did not seem like a very serious development. Governments and Central Banks in several countries actually raised their forecast for Economic Growth after the embargo was announced. But then, it became serious. This is a picture that talks of the end of this europe. This is a picture to me that talks of the end of this era. 1973, a in november of number of western European Countries imposed a sunday driving ban due to the scarcity of motor fuel. Everyone took this as a bit of a lark. This occurred in the netherlands, belgium, italy and switzerland, germany and a few other places. And it was great. Students went out and had a picnic on the motorway. You can find photographs of kids rollerskating down the motorway. People left their cars at home. It was a real adventure. This was at a time when it was not quite accepted that this was in fact an economic turning point. Within two weeks of this event, this was early november of 1973, within two weeks, the mood changed rapidly. Motorists around the world began to queue for gasoline supplies ran low. You canin the u. K. , but see similar photos anyplace in europe or north america. The panic spread to japan with a forgotten crisis. The toilet paper crisis. Rumors went around there was a shortage of toilet paper in osaka and there was panic buying. There were people actually injured because the japanese were so desperate to get toilet paper before supplies ran out. The ministry of International Trade and industry had to order that the warehouses be emptied the stores be supplied with all the toilet paper people can use in order to quell this type of panic. In italy, the crisis in the fishing industry. Fishermen went on strike to protest against the high cost of diesel fuel. At the beginning of november, there was still an optimism at 197 about the situation. By the end of the month, a feeling of crisis. We are moving into a new time, a new era, and all of a sudden, the Central Banks started downgrading their forecasts for 1974. The oil crisis itself was over fairly quickly. By the spring of 1974, supplies back to normal and prices receded. But surprisingly, the economic turmoil did not go away. A few figures here will tell a tale. From 1968 to 1973, income per worker rose at a 3. 4 annual rate in the 28 wealthy economies. 3. 4 a year. From 1973 to 1979, it grew by only half that. Average unemployment in the market economies topped 5 in 1975 for the First Time Since the war and refused to go back down. People assumed this was perhaps a cyclical thing, unemployment would go up and then go back down. And it did not come back down. Meanwhile, inflation soared. The u. S. Consumer price index rose 70 between 1973 and 1980. , in italy, in the united kingdom, Consumer Prices doubled over that same time. These were not happy times. The economists who had been so eager to tout their ability to maintain steady growth and full employment suddenly seemed helpless. They described the new situation with a new word stagflation. As if the world were afflicted by some unusual disease. I think it is helpful today to recall the way inflation was understood in those days because the understanding of inflation in the 1970s would strike us as bizarre. There were different types of inflation, this is what was said in the public discussion. There was something called cost push inflation caused by unions forcing up wages and employers raising prices. Recommended care was price controls. President s johnson, nixon and , carter altright controls as did government in great britain, spain, belgium and many other countries. Price controls were typically greeted very warmly by the public. They were going to solve the inflation problem. And the editorials of the newspapers were overwhelmingly positive. Normally, this enthusiasm lasted about two months and people began to see price controls were not all they were billed to be and caused severe economic dislocations. Alongside cost push inflation, there was something called demand pull inflation. That means people were trying to buy too much stuff. One cure for that was credit controls. So that households and soinesses could not borrow easily, so they couldnt buy so much. We had credit controls in this country. President carter tried them and they were used in the number of other countries. Economists and politicians overwhelmingly believed there was a permanent tradeoff between unemployment and inflation. This was best described in 1978 by president carters chief Economic Advisor who died just last year. He said we know how to get to full employment. Thats not the problem. We know how to do it with the old standard tried and true techniques tax cuts, easy money, putting more money into certain government programs. But, when we do that, we set off the inflation. And so, the government itself was helpless against inflation or so it believed. No one believed it more prominently than arthur burns. Arthur burns is here, second from the right between gerald ford and richard nixon. Next to nixon on the other side is Milton Friedman. Burns was the most prominent economist in the United States. He was the chairman of the Federal Reserve board from 197078 and he did not believe Central Banks could do much about inflation. As i said, you have to put yourself in the mindset of the 1970s to think about how the economy was being run, with the central banker saying inflation is not my problem. In burns view the way to fight , inflation was to deal with what he called the public psychology. Today, we regard the fed chair as the most powerful economic actor with respect to Economic Policy in any country. Fed chair arthur burns thought of his role as being psychologist in chief. That sort of thinking seemed to say that governments were powerless in the face of slower growth, high unemployment, and persistent inflation. As paul volker would show starting in 1979, the government is not powerless in the face of inflation. But the persistent inability to deal with slow growth and high unemployment had two important consequences. One was rising criticism of the welfare state. The welfare state had grown markedly in the 1950s and 1960s, in part because there was lots of money to fund it. Higher taxes had not met with serious objections. They were not a burden to taxpayers in the u. S. , europe, or canada. But the welfare state began to run into serious objections. As Income Growth slowed. Now, when taxes had to be raised to pay for the welfare state, people responded their incomes after inflation were not going up and they felt the bite of these taxes and blame the welfare state for their economic stress. The other consequence of the slowdown in growth and the inability of governments to get it started is that the failure of these mainstream approaches opened the way to what had fringe ideas about Economic Growth. The reaction to the welfare state got its start not in california as people sometimes remember, but in denmark. A tax lawyer in copenhagen in 1971 went on a Danish Television show waving his tax return. He is holding it up on the screen. His tax return showed no taxable income. And he said to people, you dont have to pay for the welfare state. This kind of thing wasnt done in denmark where there was a local consensus surrounding the welfare state. He was regarded as a crackpot , and to a certain extent he was. His defense policy was they should remove everybody from the Defense Ministry and put in an answering machine that said in russian, we surrender. [laughter] Marc Levinson no Political Party in denmark wanted to deal with him, so he started his own and in 1973, his progress party, critical of high taxes and big government, shocked the country by becoming the second largest Political Party in the danish parliament. Much the same happened in norway where a guy, a disaffected rabblerouser, created a party for public intervention. He had gotten his start as the publisher of something called the dog newspaper. It was against taxes on dogs, among other things. He started another newspaper. You see it on the screen. He is saying here, the headline is, i accuse. He is accusing the United Nations in this particular case of being countries and in supporting the socialist causes. Hes got on the left and right, little boxes with aphorisms of his about how the private sector creates surplus and that Public Sector creates deficit. That sort of thing. He was a wellknown crack pot. Norway. Except people did not think he was such a crackpot. In 1973, his party for a strong reduction in taxes, duties, and public intervention won seats in parliament. It is still there for a four years on, one of the most influential parties in norway. 1976, in january, the swedish tax Police Arrested the countrys leading cultural icon, director ingmar they arrested him in a theater where he was rehearsing a play. It turned out the swedish tax police claimed bergman owed taxes equal to 140 of his income. Some of you may know the be the author of thepippi longstocking stories, the author posted a story about a writer who is success cost her to face taxes equal to 102 of her income. It turned out this had happened to her. They were both social democrats, but their cases jeweled an uproar that led swedish voters to toss the party out of government for the first time in four decades. This is the background of the rise to the right. There is a considerable literature on the rise of conservative politicians, and typically the success of politicians like Margaret Thatcher and Ronald Reagan is attributed to the efforts of ideologues of various companies to promote freemarket ideas. Organizations like the center for policy studies, established in london in 1974, are credited with hammering away at liberalism and paving the way for the conservative ascent. I think this explanation falls short. The fact that almost all the ideas had been around for many years, all of the ideas from these rightwing groups have been around many years. It should make us rethink why they suddenly became popular in the late 1970s. In general, these ideas were regarded as french ideas when the economy was growing strong. Take the regulation. It has been proposed in the United States since the 1950s as ways to deal with various problems in transportation and other things to almost total disinterest. As late as 1971, the u. S. Political scientists observed, procompetitive Regulatory Reform was articulated as a policy prescription that remained a solution in search of a widely perceived problem. Similarly, Milton Friedman have been pushing the idea of Central Banks to follow a firm rule on Monetary Policy for many years with negligible success. Why did these ideas suddenly come into fashion in the late 1970s . The political shift occurred across all the advanced economies, and i suggest that the underlying cause was the inability of the reigning social market model to produce the Economic Growth that voters had come to expect. Voters chose the right because they thought the left has failed. The only exception to this trend was in france. Voters elected a socialist president in may 1981. He tried a variety of orthodox socialist policies in order to restart growth, including nationalization, controls on currency flows and many other policies. The results were so disastrous that he soon became as much a fan of the free market as his conservative counterparts in other countries. By the late 1970s, it was clear the growth slowdown was not due to the price of oil but a far more fundamental factor, slow growth and productivity. Productivity is a term folks find offputting at the concept is simple. It is the efficiency with which economy makes use of resources such as labor, capital and energy. Along with population growth, productivity growth is what makes in economy grow. From 19601973, productivity growth in the wealthy economies was between 4 and 5 per year. In the second half of the 1970s, productivity grew well less than 3 per year. His explains why worker incomes were rising slowly if at all. The conservative claim was marketoriented policies such as lower marginal tax rates, Smaller Government and deregulation would induce private sector investments that would lead to higher productivity. To make a long story short, that did not happen. Conservative government brought in an array of new policies but productivity growth did not follow. In the United States, Ronald Reagans acolytes asserted his policies have achieved an economic miracle, but the data does not support that claim. As reagans first budget director admitted in 1986, the fundamentals that i look at are not a miracle. Our savings rate is the lowest in modern times it last year our productivity growth was flat and our whole every our whole theory was we would cause in explosion of activity growth and rising real income. The same holds true around the world. In the united kingdom, Margaret Thatchers reforms did not bring faster productivity growth. In france, where the government turned first sharply left and then sharply right, productivity grew no faster in the 1980s than it had before, and grew half as fast as it had before 1973. I can find only three countries where productivity grew faster after the freemarket reforms of the 1980s than it had before the crisis. One was south korea, the second was news england, the third was malta. The second was new zealand, and the third was malta. What is this leave us . I can answer that with a single word. Disappointed. [laughter] mr. Levinson slow productivity growth has brought low income grows beard not just in the United States, but in all highincome economies and in most middle income economies, as well. Incomes simply are not rising as rapidly as people have been taught to expect. The more skewed distribution of income in many countries means many families incomes are not rising at all. You can see the widespread public discontent with the performance of government is no mystery. It is an inevitable result of Unrealistic Expectations about government ability to direct the economy that were encouraged during the golden age. But that, i argue, was an extraordinary time, and era that cannot be repeated. In most countries at most times, Economic Growth is merely ordinary. In our political system will have to adjust to that unhappy fact. Thank you. [applause] we will now open this up for questions. We have some ground rules. If you would wait to be recognized and then wait for the microphone to reach you, then identify yourself and please use the microphone. Keep it up to your mouth when you ask your question. We have someone on the far left of the room. Here is the microphone. Kent hughes. What then explains the golden age . Was it Unused Technology piled up during world war ii, was it the sudden burst of spending after looking back at the depression or was it the very expectations were so different because of the depression . Mr. Levinson there are two Different Things i think explains the golden age. One is that there were a lot of underutilized resources that enabled productivity grow very quickly. Think, for example, of the tens of millions of agriculture workers around the world at the end of world war ii who were still plowing fields behind mules and horses or hoeing by hand. Almost all of those people could move into factories, and immediately productivity rose. They were using the latest machinery instead of horsedrawn plows. We had rapid improvements in education in the postwar period. In much of europe, the average education at the time of the Second World War was about six years of schooling. University education was relatively rare. In the states, while the education levels were higher, most americans did not graduate from high school before the war and Many Americans did not even go to high school before the war. There were opportunities to raise education levels very quickly. Governments helped do that, and that of course made workers more productive. Then you had significant investments like constructing motorways, which made good transport more cheaper and help firms be more efficient and gave workers access more jobs. All of these things have made it possible to capture basically some low hanging fruit. At the same time, you had some technological changes. One of the things that is curious, if you spend some time immersed in the activity data, is that historically, productivity tends to grow in spurts. For rather on anticipated reasons, the economy is going on at an uninteresting pace and then all of a sudden it speeds up grows much more quickly for a few years and then goes back to the rate of growth it had before. That has to do really with things coming out of the private sector, yet option of innovation in the business sector, by and large. Perhaps the bestknown example in the United States is productivity growth in u. S. Manufacturing in the 1920s, which is related to the adoption of electricity, which first came into use in the 1870s. It took decades before the existing factories were reconfigured, before existing machinery was replaced, before manufacturers could take full advantage of the possibilities of this new technology. Similarly, you had telephones that had been invented in the 19th century, but in many countries they came into widespread use only after world war ii. Jet airplanes. Those sort of innovations. It could not really be continued. Many of the things that drove higher productivity were onetime events and were exhausted. Once you brought those farm workers into manufacturing, you could not do it again. The rest were these unpredictable technological advances that got incorporated into the economy at an unpredictable rate. That was great while it lasted. And then it stopped happening. Since then, in general, productivity growth has been slower. We had one exception, which somewhat illustrates how this works. In the late 1990s, we had three or four years of rapid productivity growth surrounding the internet. This was due to innovations that have been developed in the 1970s and 1960s and found her way into economic use in the 1990s. Productivity is lumpy and unpredictable and the tough thing for policymakers is that they can do very little to make it happen on a predictable schedule. Can i follow that up and ask you to talk more about the relationship between productivity gains and income gains . The book is extraordinarily rich with story after story, example after example from country after country on the wide sweep of economic history. The punch line is the slowing of productivity growth results in wage stagnation. At the same time, given all the other things you talk about, ceo compensation goes through the roof. Is that an inverse relationship to productivity, or are those other factors, politics, taxation, the restraining of regressive taxation for a different system that skews income upward, it seems to me in the realm of the quality of life you make clear, it cant always be measured by economic figures. That larger political context is key. Some of that wage loss or stagnation in part goes sidebyside with the skewing upward of income that either does or does not have to do with productivity. Could you address that in a bit more detail. Mr. Levinson the distribution of income has a great deal to do with government policy. I think they can do a lot more to affect that than productivity growth, which is pretty resistant to anything the government can do on a editable schedule. The challenge here i think in terms of income distribution, and why this is a critical issue, is because when the economy is growing slowly, there is less to distribute. You do a simple math problem. The economy is growing 4 per year and someone is getting 6 and someone else is getting 2 , everyone is Getting Better off. If the economy is growing. 5 every year and someone is getting 2 , someone else is getting a zero. It is inevitable that people are not seeing wages rise. It is very true that government policy can affect the distribution of income my and i think weve seen some other governments have success in that area. In terms of redistricting income to people of more modest means. This is more tough to achieve when there is more growth. I think this gets misunderstood in the populist debate. In talking to people about my book, they are wanting to talk about the tax break for carried Interest Income. The tax break may be unfair and is making Hedge Fund Managers rate, i would not argue with that, but doing away with the tax break for carried Interest Income is probably not going to do much for the larger question of getting the economy growing faster. It is going to be more about redistributing resources in the economy that is growing relatively slowly. Roger lewis. You say a word about where these ideas of productivity work projected into what was becoming at that time the third world. I am well aware that take off the rate was one of them. How does this fit into your interpretation . Mr. Levinson i showed you at the beginning, my photograph of Carl Schiller. The chapter in which i deal with Carl Schiller also addresses his counterpart in the third world, an argentine economist. He developed the notion that under investment is what were then called the developing countries was really a result of their dependence on commodity trade. He developed a theory that they needed basically to protect themselves and promote the creation of Manufacturing Industry in order to provide for capital accumulation that would then lead to future Economic Growth and get them out of the commodity trap. That was his idea. It was in some ways a very wellfounded idea. But he was, one might say, politically naive. You would have these protections in place for a few years and you would have a Planning Ministry in the government that would decide exactly which industries should be fostered, and they should be fostered for only a short period of time and then the economy should be opened up. Now you have these local industries, they have to compete on a world scale. He did not consider himself a protectionist, he believed the market was a good thing and competition was a good thing. He thought poor countries needed a jumpstart to become part of the market. What happened in many developing countries is once you had some of these industries started up, the people who were protected never wanted to sacrifice their protection, no competition was allowed and you had very inefficient production going on in many countries. And you had the economic planners making the same kinds of decisions that Carl Schiller and his staff were making about where should go where and thats what should go where in trying to find in the economy to achieve a performance goal and it did not turn out well. So at this point, the argentine economist is in somewhat disrepute, but at the time he was the leading thinker in what was known as the developing world. My name is dimitri. Thank you much. My first question is about call schiller and the magic square. What did they see about the strong growth . Did they assign a percentage number two it . You didnt mention the removal of the Gold Standard. I wasnt alive then, but i was wondering if there was some kind of psychological effect combined with the oil crisis, maybe there was a psychological effect and decrease in investment eared and if you have time, off the topic, i have not heard about the russians keeping the currency deliberately unstable. Im from russia, so i am interested. Mr. Levinson you have given me an excuse to talk about something i avoided in my presentation and tried to deal with in the book. The question of Economic Growth in germany, the determined this scientifically every year. They were looking for growth in the 4 5 range. They thought it was consistent with zero inflation and full employment. They would have told you they did not do this on any kind of, based on any kind of belief but scientific analysis of the data they had about the economy. They came out with forecasts every year and updated them every year. Forecast is really the wrong word because they were not forecasts, they were projections about how the economy should grow. They believed that what happened, and did not particularly like when data came in that showed the economy did not grow that way. For people active in Public Policy at the time in the 1970s and early 1980s, Exchange Rates were the preeminent issue of the day. Here we have a case of myopia in a certain sense. Because people were not paying attention to the fact that productivity growth was collapsing, people were paying attention to the fact that Exchange Rates were unstable. For those of you who dont know the gory details, the Exchange Rate in the hearing after world war ii were more or less fixed in what is called the Bretton Woods agreement. That started falling apart in the early 1970s and was all gone by 1973. This left the world with a system of floating Exchange Rates, which many central bankers were uncomfortable with and businesses did not know how to deal with. And so we had meeting after meeting him a summit meeting after summit meeting in which president s and Prime Ministers got together and tried to figure out how to deal with Exchange Rates. Somebody got their rate was too high, somebody thought it was too low. There was no serious discussion of going back onto the Gold Standard. Exchange rates had been pegged to gold until 1971. There were some obvious problems with the Gold Standard, one of which was that United States was having to buy dollars from other countries with gold and they had a finite amount of gold. There were good reasons it was in disrepute, but there were a lot of discussions about alternatives to it and many central bankers were profoundly uncomfortable with floating Exchange Rates. On the other hand, there were such a vast financial flows beginning in the 1970s that it was really no other sort of Exchange Rate system that was practical. In france in 1981, the president cut off capital flows. I recall at that time being in another country and running into some french travelers who were very hard up for cash because they can no longer use their credit card. The idea of saving the French Economy was to prohibit people from using credit cards outside of france. It would block the export of money. Money found its way outside of france in other ways. Tens of billions of francs made their way into switzerland. It was not possible to block the Large Capital flows as countries tried to do in the 1950s. That is why the system is falling apart by the late 1960s and early could not be put back together. There are still some people around today who think the Gold Standard is the answer to all our problems, and all i can say is that there are some people around who dont really learn from experience. [laughter] would you like to respond to the question on russia . Was there any psychological effect on the American People when they went off of the Gold Standard . Mr. Levinson not very much. The Gold Standard was really less important to us because everything was denominated in dollars then the people in most other countries, with currencies that appreciated very steeply. We did not see that here, we started to see a few years later when we had large increases in exports in countries like japan and then started blaming them for keeping their currencies artificially cheap. That came significantly later. Up here. Melissa lloyd. One of the things i thought was interesting, you are talking about the economists that thought they would replace fear feelings with logic. Today, it seems we are replacing logic with feelings. [laughter] i was wondering about your feelings on striking a balance. Mr. Levinson i dont want to sit here as a political pundit, so i will sit here from an economist perspective. I think one of the things that is very hard to accept and certainly hard for politicians to accept is that they have a lot less ability to control the economy then they think they have got. Clearly things that government does make a difference in the long run. We would be a lot worse off over time if governments have not invested in education, if we have not built the interstate highway system in the United States and so forth. That is important. Those things have benefits, but how quickly the benefits are perceived and how strong the benefits are is almost impossible to foresee. Governments can deliver stronger Economic Growth in the short run, we know that its very possible. They can provide tax cuts, they can hand out money to citizens, they can cut Interest Rates to zero, all of those things will for the moment induce Economic Growth. But the effect will not last very long. So they can do these longerterm things that will influence it in a very positive way over the long run. I think innovation is great and policies that promote innovation are good in over the long run it is good for the economy. But that does not fit comfortably with a politician running for office who says, i will double the rate of Economic Growth. During the last u. S. Election, we had two candidates, both of whom claimed they were going to make the economy grow faster than it had been. I am not very optimistic about the possibilities of politicians achieving that kind of goal. Here in the front. David. First of all, thank you for an extremely interesting lecture. My question is, looking at the practicing economists today or their school, if that is still a term you can apply, who shares your fundamental belief in this concept of productivity Going Forward . Mr. Levinson who shares my fundamental belief in productivity . I think every economist would tell you productivity is the most important factor beyond Economic Growth by a very wide margin. I dont think there is any serious dispute about that. What i do find interesting, and this is something i realized while writing the book, is that macroeconomists have very different ideas about what makes an economy grow. Some of them will swear to you that you need the Gold Standard to do it, others will tell you you need a Milton Friedman style monetary role, others will tell you need smaller or bigger government or lower taxes or higher taxes, more regulation or less regulation. They all have their own toolkits to make the economy grow faster. But every one of them in the macroeconomics business beliefs their particular toolkit will make the economy grow faster. They are not very accepting of the idea that there are serious limits to the ability of economists to make the economy grow faster. They want to be in the business of advising governments of how to achieve this, and it is not palatable advice to say, well, we are growing 1 and you should be happy. No president or Prime Minister will like that answer. Economists who work in the public sphere tend to not be sympathetic to the argument ive made. Over here. We will go to the back. There have been patient folks in the back. Dane kennedy. The impression of your talk is that your discussion of this postwar boom and returning to an ordinary economy is focused on the western industrial, postindustrial countries. You mentioned very briefly a couple of outliers, one of them was korea and another was new zealand and malta. My question is, what did the examples, first of all, what were known as the asian tigers and the extraordinary growth rates they have had in the last decade or so, what does that tell us about the nature of an ordinary economy and perhaps how it is shifting and why . Mr. Levinson that is a great question. I think it strengthens the thesis of the book because what the experience of the developing countries have been is that they go through a period of rapid growth and then they come down to earth. So japan had its period of rapid growth in the 1960s, and even into the 1970s, and now it is hardly growing at all. 1 a year when the a great Economic Growth rate for japan where the population is declining. Korea was growing at a very rapid pace in the 1990s and even into the early 2000s, and its Economic Growth has slowed substantially. It is still faster than here but not a whole lot. Why . In the earlier phase, it was able to take advantage of the same low hanging fruit i was describing occurred in the western industrialized countries. It had a lot of people with low indications and put an enormous amount of people into building an educated workforce in short order. That was an enormous achievement. It built that are transportation links. All of those things. They had a great economic pay off. That was a onetime burst and the economy trends into a more normal growth rate that can be sustained over time. You are seeing that now in china. It looks like the years of 10 Economic Growth are over if they were ever really there. The official figures for now are 7 per year but many people think the real Economic Growth rate in china is slower. The general consensus is it is likely to continue to get slower still. Again, the low hanging fruit has been picked, the underutilized resources have been put to use, and so most of the growth has to come from productivity improvements because youre not going to get anymore gross from shifting peasants into factories. That is done with in china. This story has been repeated in many countries around the world. The fall of in growth and not be so abrupt as it was in 19731974, but we are seeing the exact same story. The only place at this point where youre still seeing a possibility for very rapid growth, because you still have these huge amount of underutilized resources, is africa, where there are still some obstacles in the way. I think this is one reason why people who are in the Investment Business are so excited about africa. It is not that africa is so wonderful, they see some prospect of getting returns on the sort of rapid growth that economies cannot sustain as they get wealthier and more developed. In the back. Jim. I would like to challenge the numbers you are using. The productivity numbers have their roots in the National Council set up in the 1930s, so going before that, everybody agrees the numbers from the 19th century were garbage. Going forward, being in washington, we have friends in the bureau of Economic Analysis and we know how they sweat bullets trying to compare might 1969 mustang to my 2016 prius. I think there is a real argument to be made that we dont know if we are going higher low. Mr. Levinson that is true. Whether we are going higher low, we dont know. The productivity statistics i will admit freely are a total morass. There is no debating about that. You are dealing with some really difficult conceptual issues. Productivity is very easy to understand in a society that is principally engaged in producing physical goods. You can count the number of pounds of potatoes produced and the number of widgets stand in a factory and calculating work hours is fairly easy and you can see how productivity is growing yeartoyear. As you develop an economy based more on services and intellectual content, it gets hard to measure things. There is no question about that. I think that people have studied this issue quite seriously over a giving of time, trying to make sense of it. I think the data here, and the data is pretty much uniform around the world, show this strong trend to declining productivity growth. People individually cite exceptions. Does google really help your productivity . Is this a new product or is this simply a different way of serving up the same advertising you used to see in the newspaper . That is a conceptual question to a certain extent. It is not an economic question to a certain extent and that is something economists have to deal with. Im extremely sympathetic to your question. I think these things are not easy to answer. I will tell a story out of school here about a very famous economist whose name i will not mention. Who raised this issue. And as his example of where we have got account on productivity growth, he cited the airline industry. How easy it is now to go online and get an airplane ticket as opposed to how hard he recalls it used to be. For me, going in the old days to get an airplane ticket, you called a travel agent and they got to a ticket and it did not take much time. These days, you put in a great deal of unpaid labor comparing websites and trying to figure out who has the best deal. Is this really a productivity improvement since it is using more of my uncompensated labor . I dont know. I tend to think not since i hate doing it. [laughter] mr. Levinson but these are the sorts of issues economist are trying to parse as they address the question that was asked. We will stay back there. We have all seen the graphs of income inequality. You seem to be saying that that has no causal impact whatsoever, it is all to be attributed to productivity and there is no negative impact of inefficient income distributions . Mr. Levinson im sorry. Your argument is that a skewed distribution of income is related to slower Economic Growth . There is some interesting economic work that makes that argument. What i would point to hear is that the trends i have described today are occurring and have occurred since 1973 in all of the advanced economies. They are trends that are independent of any one countrys economic policies. They cannot be blamed on obamacare or the Environmental Protection agency work whatever your favorite bugbear is because you see the same trends in japan and france and elsewhere in terms of slower Economic Growth. One of the reasons i wanted to write the book is actually to try and bring the discussion of it away from domestic politics the kids i think people dont look widely enough in understanding some of these trends. The question about whether maldistribution i probably shouldnt use that term skewed distribution of income is associated with Economic Growth is an interesting one. It is not clear to me that that plays out in the productivity story but i would be interested to see what is done with that story. Stephen shore. The one thing i dont recall you speaking about is the possible irreconcilability of national electorates when so many economies are conjoined. Some might make the case that it might be good if you had International Economic planning, it might be a bad concept or practice would affect the economies rather than the separate watertight compartments that National Economic planning results in. How does this play into your thesis, the fact you have national electorates and yet each nation has to trade with its neighbors or economies dont grow in a nationalistic vacuum . Mr. Levinson this is something i dont really address in the book except in one area. I do have a chapter about the development of International Financial regulation in the 1970s. This was the era that began right around the time of the oil crisis, one result of the oil crisis which im sure those of you of you at a certain age remember, we had petro dollars. There was starting to be a lot of concern this could lead to financial instability. There was a concerted effort, which i discussed in the book, to harmonize Financial Regulation internationally so that there would be banks would not have an incentive to move money from one country to another. So that there would be less risk of a bank taking an apposite in dollars and then lending and out in the netherlands and the bank being squeezed because of Exchange Rates. There were serious meetings that are actually still going on to this day to try and harmonize International Regulations to govern the Banking Sector to provide financial stability. Those have been a failure. That is not too unkind. The experts spent years upon years and meetings upon meetings in the 1970s and 1980s trying to figure out how to stabilize the internationally by harmonizing regulations. I own feeling is that that effort actually ended up making the financial crisis that began in 2008 much worse. I think that is also some evidence that the ability to harmonize these sorts of things across the borders is limited. You can look at the European Community as a test case. They can harmonize some things and not harmonize others. Harmonizing certain things has not helped it with Economic Growth, either. Infant all the way back. It has been just over 75 years since the u. S. Went to a 40 hour workweek from what was originally Something Like 60 hours. Since that time, and massive number of women has entered the labor force and productivity has gone up according to labor statistics. Does it really make sense to expect everybody to be working 40 hours per week anymore . It for example, if you look at the typical mall, half the people are spending time waiting around for customers. If they just stopped working there, sales would not go down by much, productivity would go way up. Doesnt make sense to expect full employment at 40 hours per week anymore . Mr. Levinson that is way beyond the scope of this book. [laughter] mr. Levinson there is debate on whether robots will take all of our jobs. I can only say from a historical point of view that this is a discussion that we have had before. We have had serious discussions in the late 1950s about how many jobs were being destroyed by automation. I believe it was president kennedy that established a commission on automation to find answers. It was discussed again a decade later with another commission. These are not new problems. The assertion now is that Artificial Intelligence and robotics and so forth have changed the nature of the problem in a qualitative way. Its not a problem, it is an opportunity. [laughter] mr. Levinson im not a sociologist and it may or may not be an opportunity. I think there is a danger in understanding what is going on in this area strictly as an economic phenomenon. Because one of the challenges is to deal with the fact that for many people, work adds meaning to life. So while people may enjoy the leisure, they may miss the meaning of having a regular job. That is a whole other issue that is way beyond what i have written. We will stop there. One of my frustrations in having done some early work and time and motion studies is that nobody uses the word ceiling effect. It is obvious when youre trying to improve something, which make an improvement, you have taken some low hanging fruit to do that and you have also increased the speed, so a percentage increase requires a greater increase. Obviously want to get more efficient and faster, you will see less improvement percentagewise over time, and it seems like that is fairly obvious. There are some quick adjustments that can happen in any country at any time, and once you achieve those, you will have a falloff. It seems like a natural kind of thing. Mr. Levinson that may be true at the level of business. The data dont suggest is to at the level of the economy. You have periods when productivity grows slowly but the economy is still getting bigger from yeartoyear. And that period of slow growth is followed by a period of rapid growth. That kind of constraint obviously intuitively you can see why it gets harder to grow when you are big. But this really has to do in the context of National Productivity with the exhaustion of underutilized resources and with the integration of technology into the economy. A quick followup. One of the things we havent discussed his resource limitations. It seems like right now that is not a terrible problem but it could be a big problem in the future that would restrict growth even more. Mr. Levinson i do have a chapter in the book about the limits to growth, because this juxtaposed nicely. When the world was booming in the late 1960s and early 1970s, you had the first stirrings of an antigrowth movement. I dont know if anyone were members of publications of the limits to growth. This was a global best seller and sold 12 million copies. It warned the world was using up its resources and was headed for a crash. In the near future, by the way. It had a scientific gloss, they did some very early programming and presented findings as results of computerized analysis of the data. They did not make allowance for things like innovation. One critic mentioned that if they had written that book a century earlier, they would have missed the potential effect on growth of the oil crisis is nobody used oil. I am not convinced how quickly these constraints are going to affect us. As somewhat of an economic bent, i believe it economies adapt to those things. If these constraints work themselves out in prices as they usually do, and things become more expensive, people will find ways to avoid using what is expensive and come up with innovations that allow things to become pushed in other ways. Thank you. We are quickly running out of time. Lets go with the gentleman in the back. My name is carl. I am wondering about some of the politics here. I clearly would agree that the failure in 1973 lead to social democratic models to fall out of favor. But you argue the free market ideologies of the late 1970s and 1980s failed, as well, where they still popular and not on the trash heap . Mr. Levinson i am not sure that they are. Tell me what the ideology is that the winning candidate of the recent u. S. Election. It is not a free market ideology, it is some kind of eclectic ideology that i dont wish to strategize further. [laughter] mr. Levinson you will see much the same thing in many other countries. There has been a retreat from the free market belief to some kind of more eclectic combination. As People Struggle for solutions. Unfortunately, no one has found them. There are no magical keys to turn, no buttons to push or levers to pull that will speed up productivity growth and that seems to be independent of ideology. One argument you have started to hear in the United States now is that maybe some of the slowdown in productivity growth is due to heavy regulation. This reprises an argument on the subject in the early 1980s. And so maybe a rollback in regulation in general will have some good productivity affects in general. That is a nice argument and rather faithbased. [laughter] over here. Diane. You have answered some of my questions i think, but i wanted to know the impact, the Current Administration seems to want to take down, deregulate everything. I was curious about that impact. And they have talked a lot about raising wages to 15 per hour and companies are saying no, too much money and Small Businesses cant afford it. But isnt it better for maybe bluecollar workers to have more money so that it will go into the economy and the economy would grow . And also, you had spoken about robots. That does seem to be the future of some industries. It seems we have to keep remaking ourselves, educating ourselves. Are there paths between college and Vocational School to the various trades or jobs . Mr. Levinson with respect to deregulation, the battle over deregulation is waged on the basis of anecdote. People make comments about some particular industry and the effect of regulation on that industry. You can understand why that is. I have written about regulation myself, if you have read my other book. I talk about transportation and regulation and how it inhibited Development Container shipping. It is a big leap from these types of stories to a macroeconomic story to the connection between regulation and productivity growth. There is certainly some reason to think that in some cases, regulations lead to faster productivity growth because they spur innovation. But how does one balance this at the macroeconomic level . I have no idea. The people who work on regulation are typically not macroeconomists. You dont see work trying to come up with an answer to that question because it is really not feasible. People make bold statements. But they dont really have much backing for those statements in many cases. With respect to i dont want to get into a discussion about politics, but i want to say one thing in response to your question about the minimum wage, because it is something that fascinates me. The debate about the minimum wage is to a certain extent backwards. A minimum wage in general is going to be good for productivity. A higher minimum wage. The reason for that is that one of the key factors in driving productivity growth is the substitution of capital for labor. If labor is cheap, employers have relatively little incentive to substitute capital for labor. If labor becomes more costly, capital will be substituted for labor and productivity will rise. Now, in the political debate over the minimum wage, this gets expressed as millions of jobs will disappear. At least temporarily, that may in fact be what happens. Historically, as we have substituted capital for labor, displaced labor has found its way into other sectors another kinds of jobs. That is how economies grow. I would expect that we would see that happen here. That is the way in which a higher minimum wage would affect productivity, encouraging capital investment. I unfortunately have to draw this discussion to a close. But the issues raised, or at least the economics of history will be back next week. Ed will be speaking on his just published book, and we invite you to attend on monday. Copies of an extraordinary time are available outside the door for purchase. And let me just say, it is a very readable and engaging book. And this is from a noneconomic historian. I want to thank you and our speaker today, mark levinson. [applause] youre watching American History tv, all weekend, every weekend, on cspan3. Facebook, at cspan history. Which president s were americas greatest leaders . We ask historians to rate our president s in terms of leadership. Top billing went to the president who were preserved the union, abraham lincoln. Three other top vote getters continue to hold their positions. George washington, franklin roosevelt, and theodore roosevelt. , 19531961,hower makes his first appearance in the cspan top five this year. The top 10, harry truman, thomas jefferson, john f. Kennedy, and Ronald Reagan. Lyndon johnson jumps up one spot this year to return the top 10. But pity james buchanan, he is ranked dead last in all three surveys. Add news for Andrew Jackson as well. He found his rating dropping from number 13 to number 18. But the survey had good news for outgoing president barack obama. On his first time on the list, historians placed him at number 12 overall. George w. Bush moves up three spots to number three number 33 overall. How did our historians rate your favorite resident . Who are the leaders and losers in each of the 10 categories . Find all this and more on her website, www. Cspan. Org. Website, www. Cspan. Org. Next, historian Kathryn Clinton talks about what happened to president lincolns family right after his assassination. She discusses mary todd lincolns struggle with her husbands death. Clinton also recounts what happened to the president s two surviving sons and their surviving descendents. This is a part of the lincoln family form symposium. It is about 50 minutes. Catherine it is so nice to be here, to be back at the lincoln forum. Such a warm audience, and im so glad that i was assigned this hot subject of looking at the first lady, mary lincoln, and her time of trial. But i did want to say, especially, it is wonderful for me to be here because i was really propelled along the road to doing my biography of mrs. Lincoln by being here, listening to speakers, having people make comments, someone leaning over to me after a lecture say, isnt it terrible how they shoved mary lincoln out of the room just as her husband died . And that is something that caught me on the road. Of course, it is harold and the