In Service to Plutocracy

...As befits a Tunesman, Silk describes in dispassionate, amused tones the follies of administrators and politicians who so frequently ignore the advice of his newspaper's editorial writers Silk's concluding paragraph typifies his style...

...For such a boon, the argument went, it was well worth paying a price of increased unemployment To the business community, higher joblessness implies the cooling of union militancy, tightening labor discipline on the assembly lines and improving the competitiveness of American exports in world markets The burden is borne by nonvoters or Democrats-blacks, Puerto Ricans, Chicanos, women, and young workers, the last to be hired and the first to be fired It is only fair that the benefits accrue to their former employers...

...Richard Nixon deserves to be absolved of the charge of inconsistency, for he has never failed to fight for the good people who put him in the White House This is the story that both the New York Times and Silk's Nivonoinics have left untold The outcome of the 1972 elections will depend in large part upon the capability of the Democratic Presidential nominee to dramatize it...

...Nixonomics is of the essence of politics, and the pyrotechnics of party management and of advertising explain its extraordinary range, diversity, flexibility and style It comprehends Friedmanism and Keynesianism, laissez faire and price controls, mercantilism and free trade, the ideologies of free enterprise and social responsibilities It might be described as the most comprehensive economics in the history of the world '. Nixon's antics almost inevitably invite this sort of easy response After all, without confessing any past error, the President embraced not one but two previously unrecognized prophets in less than a year In January 1971, he announced that he had become a Keynesian, then, on August 15, he clutched at John Kenneth Galbraith's wage and price control heresies-refraining, of course, from mentioning the dreadful name...

...Under the circumstances, it is fortunate that the Cost of Living Council, the Pay Board and the Price Commission have only marginally affected the behavior of wages and prices Insofar as any policy emphasis is visible, it is an inclination to lean much harder on unions than major corporations By now an Administration seriously concerned about inflation and equity would have done something about food piices, lifted oil quotas, prohibited automatic profit pass-throughs, and controlled rents...

...Keynes or no Keynes, m the spring and summer of 1971 the economy remained sluggish, the deterioration of the U S balance of payments accelerated, and the gnomes of Zurich, Pans and Basle-aided by their allies among the treasurers of the major multinational corporations-began to speculate heavily against the dollar The electoral clock that ticks within Richard Nixon's bosom must have been sounding ever louder alarms, something else had to be tried Consequently, on August 15, the President froze wages and prices, suspended dollar convertibility, clamped a 10 per cent surcharge on imports, and urged upon Congress a series of tax cuts, mostly designed to enlarge corporate profits and revive the automobile industry...

...According to Lekachman's First Law of political economy, however all economics is inexact and Chicago economics most inexact of all Thus by the end of 1970 unemployment had mounted to an even 6 per cent, nearly double the 33 per cent of Lyndon Johnson's last month in office But despite Friedman, prices refused to subside What was even worse, profits began to sag...

...Faithful to his constituency, Nixon had administered a new dose of commercial Keynesianism, stimulation of the economy not by social expenditure or tax favors to the poor, but by tax concessions to corporations and their prosperous stockholders As the trade unions but very few economists perceived, the President's remedy was Hoover trickledown economics in modern drag In retrospect, the farce of Phase II is entirely consistent with labor's interpretation of events...

...To his corporate supporters, therefore, Nixon's endorsement of deficits during a recession and balanced budgets only at full employment was less a shock than a cause for relief, it showed that the President was finally catching up with the views of his admirers, who yearned for a return to the climate of the mid-'60s The 1964 tax cut had been predicated upon a similar assumption that actual deficits during a slack economy generate the kind of activity that enables the Treasury to extract sufficient revenue at a time of full employment to balance its operating budget As it happened, the economists' forecasts then were validated by a delightful boom...

...Businessmen demanded action Among the sophisticated entrepreneurs, financiers, and conglomateurs who subscribe to Fortune and Business Week and subsidize the Committee for Economic Development, Keynes is no longer a swear word If Lyndon Johnson had taught them anything, it was to appreciate the extraordinary benefits of partnership between big government and big business in a buoyant economy Although businessmen had been willing to give the monetarists a whirl, they were, after two years of negative results, quite ready to return to fiscal expansionism-particularly if the stimulus of unbalanced Federal budgets was to be applied in such pleasant ways as profit-enhancing revision of the depreciation accounting rules and promises of other tax benefits to come...

...In Service to Plutocracy Nixonomics By Leonard Silk Praeger 212 pp $6 95 Reviewed by Robert Lekachman For those who do not read Leonard Silk in the New York Times, where he serves as resident economic specialist, this brisk summary of the Nixon Administration's conduct of economic affairs is likely to be quite useful Nixonomics does more than merely record the zigs and zags of a President fascinated by his role as world statesman and visibly bored by the details of domestic management It explains lucidly and on occasion entertainingly such arcane matters as the monetarist faith of Milton Friedman and his Chicago disciples, the meaning of full-employment budgets, and the complexities of international currency relationships...

...Viewed in this light, the Administration's three successive and apparently contradictory approaches to inflation and unemployment fit snugly into a single mold During 1969-70, the President readily accepted the assurances of the Friedmanites in his official family-notably George Shultz of the White House staff, and Paul McCracken and Herbert Stem on the Council of Economic Advisers-that if only the rate of growth in the money supply could be checked, then surely the pace of inflation would soon slow...

...Nonetheless, Silk would have done better to suppress his sense of humor, for it leads him to miss the major point of Nixon policy the extraordinary consistency of the President's solicitude for the business constituency that from his California Red-baiting beginning has nurtured him, financed his political enterprises, and very properly commanded his allegiance (when one pays for a politician, he should stay bought) In the service of plutocracy, Nixon has traveled from Friedman to Keynes and Galbraith Indeed, it the need arose, he could be relied upon to see merit in Henry George or Karl Marx...

...But 1971 was no repetition of 1964 Two years of inflation and unemployment had dampened consumer morale Apprehensive families continued to save unusually high percentages of their disposable income even after the President abandoned his monetarist policy And relieved as businessmen were by the President's new fiscal activism, they saw little reason to embark on an investment boom when they could sell only about 70 per cent of what their existing facilities could produce...