Roger Martin, an analyst at Canadian think tank, wrote in his book "Immobile America" that the root cause of social and economic imbalance in the United States is the excessive pursuit of efficiency in the whole society.
However, in the latest masterpiece "The Great Turn", economic historian Mark Levinson, he pointed out that productivity is the fundamental reason for the glory of the economy.
Is the era we are in different, so we have different views on efficiency. It is undeniable that this era is full of variables, and there are economic difficulties in any country. Especially the epidemic in 2020 has not yet ended completely; the Russian-Ukrainian war in 2022 is still continuing, but it has had a huge impact on the entire world pattern.
Levinson pointed out in "The Great Turn": "The current world pattern originated from the crisis in 1973." Is this true? If you are interested in economy or history, you might as well open the book and read it slowly.
"The Great Turn" This book was rated as the best economics book by The Washington Post in 2016 and was highly recommended by Professor Irving, an economist at the Federal Reserve and a member of the US President's Economic Advisory Committee.
Author Mark Levinson received a Ph.D. in History from the CUNY University. He has served as an economist at JPMorgan Chase, editor of the Economist, and senior contributor at News Weekly . As an economist and journalist, Levinson is particularly good at discussing the point of view from details, but also has a global perspective.
"The Great Turn" is Levinson's ambitious work. The book has a comprehensive content, taking 1973 as its foothold, and a panoramic review of the 50 years of the rise and fall of the Western economy after the war. Pay special attention to the aspects of transcending national boundaries in the crisis, not only from the political perspective of a certain country, but also describe the macro forces and real situation behind it.
This book talks about the history of pension changes, the response measures of developed countries to stagflation, the handling of unemployment, the emergence and end of oil crisis, how Arab countries control the right to speak in oil pricing, the economic development history of in developed countries and developing countries, and measures to deal with inflation ...
Basically, the economic problems of the contemporary world can all be found in the "Great Turn". I think it is a little regretful that this book does not talk about the food crisis. In short, understanding the economic history in "The Great Turn" can better understand the current world pattern and economic dilemma, whether it is for individuals, enterprises, or countries.
This book is quite suitable for intensive reading. Learning from history and preparing for the future has always been a fine tradition of the Chinese. I hope you can understand your future development direction from this book.
On the night trading on July 5, 2022, international crude oil plummeted, and the US dollar index hit a new high. Global Economy has reached a crossroads, and there are many voices in the market: some people think that the economy is beginning to decline, some people think that it is a period of stagflation, and some people think that debt risks coexist with inflation risks...
Similar history was staged in the 1970s. How did the government solve it at that time? Let's go into "The Great Turn" now.
01 The past and present of the Organization of Petroleum Exporting Countries and its impact on oil prices
Saudi Arabia and Kuwait TM3, UAE, Qatar The Organization of Petroleum Exporting Countries was established as early as 1960, but the organization at that time was just a small organization with "small people and light words". Because the oil business in that era was controlled by the "Seven Sisters" of the oil organization composed of American and British companies.
The Saudi government, which is at the bottom of the supply chain, has very low oil revenue. This aroused dissatisfaction among the Saudi Arabian people and awakened nationalist sentiment in the Arab world. As the negotiator of the Saudi government, Yamani has stepped onto the historical stage.
Yamani was appointed Minister of Oil in 1962. After four years of hard negotiations with the U.S. and British government, the Saudi government finally won the foreign policy. So in 1972, the oil giants in the United States and Europe sold a quarter of the stake in of their respective oil company to the four countries and agreed to transfer the main control within ten years.
In September 1972, Yamani, on behalf of Saudi Arabia, announced to the world the right to speak in Saudi in oil pricing.The strength of the Organization of Petroleum Exporting Countries has aroused the vigilance of the United States, Europe and Japan. Because for a long time, governments have believed that the vigorous development of the economy is based on low oil prices, and high oil prices will lead to severe inflation.
Just after New Year's Day in 1973, global stock markets plummeted and the financial market was in bleak. This year, the Breson system, a fixed exchange rate system centered on the US dollar, officially ended. The depreciation of the US dollar has caused dissatisfaction with the Organization of the Petroleum Exporting Countries OPEC .
To cope with the depreciation of the dollar, they raised oil prices by 15% to $2.90 a barrel, and the benchmark crude oil price will be pegged to the dollar. The Yom Kippur War that broke out in October 1973 prompted the Organization of the Petroleum Exporting Countries to set a price alone, placing a new crude oil price of - $5.2 per barrel. Can the behavior of pricing alone in
be recognized by developed Western countries? Got it! Because their threats were facing good opportunities, countries around the world were in a state of severe shortage of supplies, and governments had to agree to their request.
From then on, the Organization of the Petroleum Exporting Countries has fully grasped the right to speak for oil pricing. In today's world, when OPEC's speech, increasing production or reducing production has made crude oil prices rise and fall like a roller coaster.
1973 OPEC's battle for oil pricing power triggered the first oil crisis of . The Saudi Arabia's decision to restrict oil production in 1979 triggered the second oil crisis of , making the world economic recession even worse. How did governments respond to the economic crisis at that time?
02 The impact of economists on economic policies of various countries and how to deal with crises
WWII just ended, Europe and Asia were in a mess. War changed politics, and the painful and difficult years made people yearn for welfare protection. Therefore, Canada, Belgium , France, the United Kingdom, Netherlands , Japan and other countries have issued welfare policies. This is also the origin of these high welfare countries.
However, the implementation of welfare policies cannot be separated from economic development. Since the world was divided into east and west after the war, countries around the world have begun a vigorous road of reconstruction. Against this background, the economies of Europe and Asia are recovering, and the employment rates in North American countries have also begun to rebound.
The Great Turning Tide reads: "In the 25 years from 1948 to 1973, labor productivity in North America doubled, three times the original in Europe and five times the original in Japan." Economic growth year after year, for most countries, the people believe that the government should dominate the economy and maintain full employment.
prepares a fiscal budget with the goal of full employment. The original intention is good, but the result is cruel. Economists become ruling people, using the economic model to guide the government to make budgets, adjust spending, and reduce unemployment rates. This model is called the "new economy".
Representatives of the "new economy" include: Walter Heller, chief economic adviser of US President Kennedy ; German Treasury Secretary Carl Schiller and his students Schmidt , and future German Chancellor; US President Nixon , Federal Reserve Chairman Arthur Burns; Burns's disciple, future Federal Reserve Chairman Allen Greenspan , etc.
In the early stage of the "new economy", the economic policies implemented by various countries did promote economic development. For example, Schiller's proposal for expansion of expenditure and tax cuts made Germany's economic situation very good from 1967 to 1969. However, at the end of 1969, the economic situation took a sharp turn for the worse and the inflation rate remained high. This situation not only happens in Germany, but also in the United States, Japan and Britain.
In particular, the policy of tightening first and then easing adopted by Federal Reserve Chairman Burns directly led to an economic disaster. The result of this disaster was to break the peace of the world economy for 25 years, and the Bretton Woods system also came to an end in 1973.
The author explains this history of Western developed countries and the resulting banking crisis, which led to the Basel Agreement , in detail in the book.Prevish, the spiritual godfather of developing countries, is also a supporter of the "new economy". His influence on developing countries has also left a strong pen in "The Great Turn".
At the end of 1973, all measures to deal with inflation seemed to be ineffective. The curve that describes inflation - Phillips curve also loses its meaning. The problem that arises at this time is called stagflation.
03 Economist Can the monetaryism of Milton Friedman solve the problem of stagflation?
Economic stagflation refers to the emergence of high inflation and economic stagnation. "The Great Turn" points out: "Economic decision makers and central bank officials were helpless about the long-term stagflation after the 1973 economic crisis, which made Friedman and his followers eventually become mainstream."
Milton Friedman, an American economist, came to a conclusion in the 1960s: controlling inflation is ultimately a monetary phenomenon, so strict systems must be formulated to manage the central bank's monetary policy. Whether it is Reagan in the United States or Thatcher in the United Kingdom, they all agree that to improve living standards, inflation needs to be controlled.
In particular, the economic advisers that Thatcher attaches most are Friedman's followers. After being elected in 1977, Thatcher enacted economic policies in full accordance with Friedman's view, strictly controlling the growth rate of money supply. Especially after she was re-elected in 1979, she implemented this policy to the end.
However, these policies did not achieve good results. Inflation in the UK continued to rise and the economic situation was in turmoil. In 1981, Thatcher had to give up monetaryism and switch to high taxes. In the spring of 1982, inflation in the UK dropped to single levels and the UK economy recovered.
From then on, the Bank of England no longer adopts a single monetary policy. As Thatcher's Chancellor of the Exchequer He Wei claimed: "No single indicator can fully measure a country's monetary environment - it is necessary to make a comprehensive judgment based on all available data."
How did the United States, France and Spain deal with stagflation? Do they believe in Friedman's money supply theory like Thatcher, or do they adopt it selectively? The author gives an answer in the book.
04 Is 2022 a new turning point? What is our response?
"The Great Turn" points out in the last chapter: Since the 1970s, people have gradually realized that the reason for economic problems is the decline in productivity. This productivity refers not only to labor productivity, but also to capital productivity and standards for technological progress.
Reduced productivity has led to a recession. The economic stimulus effect of governments in the book is effective in the short term, but in the long term, it will not help the economy recover. Therefore, the author pointed out: "Future fortune and progress in the future depend more on innovation and the application of new technologies."
For ordinary people, if they see the current world pattern and understand that economic prosperity depends on productivity, then what they can and must do is: continue to learn and keep up with the development of new technologies.
