Charting America's Future: 11. Growth Without Inflation
TYLER, GUS
This is the latest article in a year-long exchange on CHARTING AMERICAS FUTURES!! BY GUS TYLER 11.GROWTH WITHOUT INFIATION Marx was an unfaithful disciple of Hegel: He interpreted the Hegelian...
...In the Great Plains area, wind was doing what water was doing elsewhere, blowing away 14.9 tons per acre in Texas and 8.9 in Colorado annually...
...Modernization of our tracks (and trains) would not only provide passenger and freight transport worthy of the 21 st century, it would save fuel...
...but if the Hegelian formula of thesis, antithesis and synthesis is applied to the Industrial Revolution as thesis, and to capitalism versus socialism as antithesis, the third condition would be a synthesis of capitalism and socialism...
...A clear majority of Americans favor atomic energy in national polls...
...We do not have enough domestic sources to meet future needs, even assuming petroleum is supplemented by natural gas...
...So, as the Wall Street Journal put it in 1972, although "saving the family farm has been a pet project of Washington for about four decades now...
...The causes were not labor or materials, they were financing and land...
...There may be an untapped strength in addressing "wellness...
...Indeed, if Uncle Sam, who owns about 35 per cent of the nation's land, were to make just a fraction of his holdings available for such an undertaking, real estate could be made truly affordable...
...For at least the next two decades, therefore, it will be vital to conserve existing fuel and to create new—preferably renewable—sources of energy...
...as the Eastern cities became crowded, young men and their women went westward...
...A large part of American farming, especially in the highly productive Southwest, depends on irrigation...
...This entails little more than an action by the Federal Reserve Board...
...Massive investments in new energy facilities, new methods of irrigation, new towns, new systems of health delivery will not only eat up capital...
...A strategy to cope with coming crises in fuel, food, housing, and health care will demand planning, with the government in a pivotal position...
...In the fourth wave, starting in 1896, "the price of energy, food and real estate led the increases...
...The United States has moved much more slowly in setting energy standards for new buildings...
...The governors of the states bordering the Great Lakes held a conference to concoct ways to withhold their valuable free water from the Sun Belt states—or to charge for it at $25 a gallon...
...Optimizing the delivery of health services and promoting "wellness" should help to contain medical costs—perhaps the most intractable of the four inflationary furies in a society that looks upon good medical treatment as a right...
...To work at all, though, controls must be equitable...
...Farmers are rewarded for not growing...
...In the "big" undertakings, government intervention is asinequa non if for no other reason than the refusal of the private sector to risk major funding...
...According to physicists Robert H. Williams and Marc Ross, fuel consumption could thereby be cut in half...
...Restoring a balance could be dovetailed with a national commitment to energy independence, which would necessitate erecting facilities in areas that are currently sparsely settled...
...Even in the years before the Fed decided to raise interest rates, mortgages and realty costs were rising more rapidly than any others...
...Through a variety of restraints on both production and marketing, prices are set at artificially high levels for agricultural products ranging from cotton and tobacco to rice and sugar...
...Since 1973, three weapons have been used in the conservation crusade: exhortation (the moral equivalent of war), tax incentives (to retrofit or insulate) and outright regulation...
...inflation can arise from inadequate supply, excessive demand, exorbitant costs, high interest rates, overblown profits, administered pricing...
...Both conservative-minded business people and liberal-minded consumers will be urging Uncle Sam to get into the business...
...Aware of this, the United States pres-ciently developed atomic energy...
...Our present method of medical coverage mixes two systems stemming from opposite philosophies...
...much labor and raw materials also will be consumed in constructing "plants" that will not immediately turn out an abundance of consumer goods and services...
...At present, most medical education consists of how to find the "bug" and "kill" it...
...An incomes policy should seek to raise the earnings of the most deprived so that their sacrifices do not exceed those of the more fortunately situated...
...Suffice to say that we are paying heavily for subsidized anarchy...
...In effect, many in the health business have done to third-party medicine what the railroads did to the InterstateCommerce Commission: they have made it their thing...
...If the government were to intervene once more—this time to guarantee the income of the small farmer while reducing the take of agribusiness in order to lower prices—it would be difficult forthe industry to makeaprin-cipled objection on the ground that Washington ought to keep hands off business...
...Yet allowing a correction for the desired economic resurgence, the conservation potential remains "enormous," note Lester Brown and Pamela Shaw in a Worldwatch Institute study, "partly because the amount of waste is so large and partly because the country has the technology and engineering wherewithal to increase the economy's energy efficiency...
...Still, it is prudent to prepare for a contingency when—as in any great crusade?there will be a call for sacrifice...
...Thefirst group believes that the small scale minimizes the risks of pollution, massive breakdowns, or dependence on huge concentrations of capital, and consequently is environmentally, operationally and economically more sound...
...Today, about 10 per cent of the gross national product goes to caring of the sick...
...In this multibillion dollar enterprise, no one is in charge of seeing to it that health care is delivered in the best way at the least cost...
...The government buys up crops and orders produce to be destroyed to place floors under food prices...
...rents and land values rapidly increased...
...New towns could emerge in areas where land is relatively cheap...
...Its purpose is to present the national potential and to offer a process...
...We need to formulate policies on distribution and pricing today, and on water and topsoil in the coming years...
...Equally important would be programs to create a wholesome environment...
...they are penalized—denied price support?if they do grow...
...If we apply ourselves as a nation, we could develop an inner space program having a more far-reaching impact than our outer space program...
...It may very well be that, as with atomic energy and communications satellites, the risk will be assumed by the government and the productive result will be handed over to private entrepreneurs...
...with abuse, health care will become so prohibitively expensive that all third-party medicine may fall into disrepute and disaster...
...I think the answer is Yes, provided the growth is properly planned to anticipate and manage the economic and ecologic factors that, untended, could price goods and services beyond the reach of the common man...
...In the second wave, starting in 1470, "food, energy and rent led the increases...
...This was hardly caused by "too much money chasing too few goods," by demand outrunning the capacity of our farms...
...standby power to impose an incomes policy would be in order...
...At most it would postpone the ultimate scarcity...
...An example is the need to rehabilitate the nation's rail beds...
...In an inflationary period, placing a 6-8 per cent ceiling on wage increases is of little meaning to those at the bottom...
...Under the best of circumstances, since oil is not renewable it will eventually run out, and before it is totally exhausted it will become prohibitively expensive...
...Nevertheless, it appears that the small farmer is on the way out: Between 1940-70, the number of farms in the country fell by more than a half, from 6.5 million to 2.9 million...
...Of the small farmers who have survived, many are vassals of corporate farming—dependent upon agribusiness for financing, seed, fertilizer, machinery, storage, refining, marketing...
...For one thing, enforcement was nonexistent...
...they continue to be designed as air-tight plants requiring the constant use of fuel in winter and summer...
...Earlier in this series ("The Roots of Stagflation") we noted two macro-economic factors underlying inflation: a concentration of ownership that allowed administered pricing, restricted output and puffed up profits...
...when the automation of the farm dispossessed the old hand-farmer, millions moved into cities...
...when the airplane and air-conditioning made the Sun Belt more accessible and habitable, the country's demographics changed...
...indeed, some families at the bottom must choose between "eat and heat...
...History is likely to repeat itself in response to an energy age on a par with the steel, railroad and auto ages...
...The literature on the subject is lengthy, lucid and, sometimes, lurid...
...for another, energy, food, housing, and health care were exempt from the guidelines...
...The remedy does not lie in denying the subsidy, for to do so would be to deny medical care to much, if not most, of America...
...This can be corrected by a tax and regulatory policy encouraging simple fuel-saving alterations—storm windows, insulation, thermal/cooling devices...
...In the same period, the share represented by land rose from 11 to 21 per cent...
...One reason is (he need io cope with inflation...
...Both objectives are realistic...
...From 1969-79, their cost increased by 128.9 per cent, as against only 70 per cent for non-necessities...
...In facing the future, the crucial question is: Can we enjoy economic growth without suffering an ultimate depletion of resources and an immediate rise of prices...
...Indeed, the suggested script here is more illustrative than definitive...
...Thanks to inflation, the median price of a new home in 1982 (about $72,000) is well beyond the reach of the median U.S...
...Their design efforts were spurred by higher gasoline prices and competition from more efficient imported automobiles, so that by early 1982 the fuel efficiency of American-made cars already far exceeded the original target...
...The cost of energy?oxen, wood, charcoal—also increased sharply...
...In the long run, as the ecologists remind us, inflation (and worse) will come with the exhaustion of planetary resources—signaled dramatically by politically manipulated shortages of petroleum in recent years...
...food, housing, and health care...
...Water levels are rising in many places, bringing in salt water to replace fresh water...
...All three involve government acts, even if the act is a meow uttered by the President from that "bully pulpit...
...They were propelled into the metropolis by the invasion of agricultural automation...
...A 1977 survey showed Tennessee losing an average of 14.1 tons of topsoil per acre of cropland annually...
...Above all, we need a policy to have policies...
...Missouri, 11.4...
...No sector of our economy more clearly demonstrates the movement from small to big, from producer to financier, from competition to oligopoly, and from free enterprise to government intervention...
...The other part of the solution, cutting down land costs, is more difficult...
...But payment is largely, albeit far from completely, guaranteed by third parties (government or insurers)?a collectivist concept...
...Out of the dialogue there is likely to issue a combination of initiatives: A homeowner may put a passive solar unit on the roof to heat water for the house, while an energy company may put a thousand collectors in a desert to serve several counties...
...and to this conciliation the Western world visibly moves...
...Further, the rate of inflation for these necessities has in the last decade been far greater than for non-necessities...
...One crucial aspect of any reorganization might be a reformulation of the curriculum for those charged with caring for our health...
...Farewell to Fairness" (NL, June 28), "The Deindustrialization of America" (NL, August9-23...
...In California, where there is a water war between north and south, the issue of whether Los Angeles shall get water from its rival, San Francisco, was put before the voters to be decided in a referendum...
...There are, no doubt, other ways to hold down prices by increasing the supply of fuel, food, housing and health care in the years ahead...
...Quite the opposite has been true...
...To begin with, they make up 60-70 per cent of the average household budget, and often close to 100 per cent of the poorer family budgets...
...Again, the initiative to bring the beds up to date will have to come from the public sector...
...A population shift of this kind, planned wisely, could mean esthetically designed, ecologically balanced new communities...
...It lacks the motive and the means...
...The uncrowding of overcrowded megalopoli could provide elbow room for urban renewal...
...Some areas where significant energy conservation could be achieved are less apparent, yet no less central to a fuel strategy...
...Moreover, should fusion replace fission, it could eliminate thedangerofleaksand explosions and provide an adequate source of continuous energy for generations to come...
...when gold was discovered in California, people rushed to the coast...
...Well paced and well placed planning might minimize this taxing of our resources...
...No doubt, too, much of this evolution will occur without any action by the public sector...
...the] mechanisms that have been built...
...The rational response would be to bring order out of the costly chaos—a mission impossible for anyone except the government in consultation with the profession and its patients...
...There is much precedent for such population movement...
...This is not the time nor is there space todocument the waste in medicine...
...Then came the scientific revolution, converting the farm from an undertaking where two-thirds of the input was land and labor and one third other items (machinery, fertilizers, buildings) to an operation where only one-third was land and labor and the other two-thirds required capital investment...
...Water erosion is washing away valuable topsoil...
...As an anti-inflationary instrument these controls can be effective only for a limited period...
...when the auto was invented, auto assembly cities mushroomed in Michigan, rubber cities in Ohio, oil cities in Texas...
...During the first wave that began in 1200, he notes, prices rose most rapidly "for some farm products, notably grains...
...Such a societal presence is the "socialist" antithesis to the "capitalist" thesis, calling for government intervention and initiatives in the total economy while preserving the positive features of a free enterprise system...
...In California, oranges have been systematically dumped for decades: In the 1950s, eight out of 10 were allowed to go to market...
...To guarantee prices, this typically capitalist sector turns to the government, accepting—nay, demanding?price supports...
...Participants in the search aredivided into two schools: those who favor the small, low-technology, scattered approach and those who opt for the large, high-tech, concentrated attack...
...At present, however, fission is out and fusion is not likely to be in until the year 2000...
...Overfertilization is ruining topsoil, too...
...The preceding pieces in thisseries were: "The Great Debate" (NL, November30, 1981h "Those New Deal Years (1933?1938)"(NL, December28,1981), "Undoing the New Deal (1939-1981)"(NL, January 25), "Responses-1" (NL, February 8), "The Roots of Stagflation" (NL, February 22), "Responses-2" (NL, March 8), "The Politics of Productivity" (NL, March 22), "Re-sponses-3"{NL...
...Iowa, 9.9...
...Part of the solution to the housing shortage—some call it a coming crisis?is relatively simple: reduce interest rates...
...April5), "Supply-Side Trickle-Up" (NL, April 19), "The Budget Balancing Act" (NL, May 31...
...Energy usage has been on the decline in the United States...
...The rivers, notably the Colorado, are turning saline...
...II ousing...
...Run honestly, the method is needlessly costly...
...In popular parlance, "incomes policy" has become a code name for wage and price controls...
...A crusade for conservation alone, however, would not resolve the fuel problem...
...Forecasters have been tumbling over one another in hastening to lower their projections...
...in the 1960s, seven out of 10...
...The great debate in the coming decade, in fact, will not be whether or not Washington should directly (by public financing) or indirectly (by tax benefits) underwrite the development of new energy sources...
...B by opening up warehouses and halting the madness of destroying oranges and hogs, although a desirable anti-inflationary measure for the short-run, would not succeed in the long run unless accompanied by far-sighted planning...
...What is involved is redistributing populations?a redistribution created the problem in the first place and another one could help eliminate it...
...in the 1970s, six out of 10...
...Let us consider each of the critical sectors separately...
...Mississippi, 10.9...
...Fourteen years of data, gathered by the Missouri Agricultural Experiment Station, show land planted to a corn-wheat-clover rotation losing an average of 2.7 tons of topsoil per acre annually through erosion, whereas comparable land planted continuously to corn lost 19.7 tons per acre annually...
...The providers of the service, particularly doctors, who originally rejected all third-party systems, now embrace them with pecuniary passion...
...The subject is one we have discussed in previous installments...
...In the inflationary '70s this trend continued, with financing and realty costs gobbling up an ever larger percentage of the total as labor shrank proportionately...
...The rate of remission from cancer is—thanks to medicine—now greater than ever...
...Finally, as we shall detail later, energy development could become the centerpiece for the uncrowding of America and for the redesign of our old and new urban areas...
...and high interest rates (tight money) that raised costs, limited supply and burdened prices with idle overhead...
...In the spring of that last year, 3.5 billion good juicy oranges were dumped to keep up prices...
...Within our lifetime, the United States' capacity for agricultural output may be seriously crippled by a shortage of water and of topsoil...
...when the Homestead Act was passed, people left their old homes to make a new life...
...These four sectors play a decisive role...
...In the third wave, beginning in 1720, Fischer found "energy and food leading the list," and "landlords were able to protect their income by raising rents...
...And greater efficiency in appliances that account for 75 per cent of home energy bills could save more than 4 billion barrels of oil by the new century...
...But some necessary developments will not take place at all unless government plays an active role...
...installing facilities—big or small—would contribute to full employment for many decades and offer opportunities for women and minorities to move into higher paying jobs...
...the poorest generally are too weak to win even a 2-3 per cent gain...
...That is apparent from a survey of "800 Years of Inflation" by David Hackett Fischer, Earl Warren Professor of History at Brandeis University, describing four great periods of long-term inflation...
...The importance of the four items in pushing up prices is not peculiar to our times...
...If America continues as an oil-based civilization, we will soon find ourselves on slippery ground...
...Bui once Americans begin to understand the role of the government as "capitalist," it is not unlikely that in the United States, as in other countries, ownership will end up in the hands of "the people...
...In 1949, financing was 5 per cent of the cost of a one-family dwelling...
...Middle Americans can no longer think of themselves as homeown-ing Americans—the traditional pattern across the nation...
...First there was the family farmer, the paragon of the free entrepreneur...
...A Federally decreed timetable to increase fuel efficiency from 14 miles a gallon in 1974 to 27.5 by 1985 set reluctant auto makers in motion...
...H ^^Bealth.Forhealthcare.lhe inflation rate in the 1969-79 decade was identical with housing's, 56 per cent greater than that for non-necessities...
...Nor can a policy be designed by the separate states...
...The early settlers were lured to the colonies by economic opportunity...
...These may be too optimistic, in that they are based on an economy whose facilities have been operating at only about 70 per cent of capacity and whose demand for petroleum as a "feed stock" (that is, as raw material rather than fuel) has been reduced by the recession...
...Consequently, some 90 per cent of the population now lives on about 2.51 per cent of the land area, putting pressure on acreage in the cities, suburbs and immediate exurbs...
...The evolution of a farm policy that benefits the big farmer at the expense of the small farmer and the consumer is an almost too perfect model of what has happened in major sectors of the American economy...
...The scenario we have set forth to cope with the four decisive causes of inflation is necessarily tentative...
...To collect the sun's rays, to gather the winds, to tap geothermal springs, to harness tides, work sites would have to be established that could become centers of living as well...
...ood...
...Will Durant The Lessons of History T ^¦hel I he United States is noi likely to escape the mix of capitalism and socialism thai Will Durant in 1968 saw as lIndirection in which the "Western world visibly moves...
...More people than ever also die from cancer, in part because they are trapped in a carcinogenic cage...
...Unless there is adequate supply to meet demand, people will turn to the black market...
...Essentially, we have been arguing that to cope sensibly and effectively with inflation in a world where population is growing and resources are shrinking, where living conditions are falling and tempers are rising, we need policies...
...The evidence is ample that otherwise the job won't get done...
...To provide food for the present and the future at reasonable prices requires active and forceful intervention by the Federal government...
...Would people move to the distant new towns and cities...
...Should a way be found to dispose of the waste and to guarantee against mishaps, energy from nuclear fission may once more win favor...
...This requires a joining of efforts on the part of the public and private sectors—as does every step along the road to growth without inflation...
...holding down the price of fuel would give American manufacture a real lift...
...The same month, Washington announced that more than a billion pounds of butter, dry milk, and cheese were being held in government warehouses below zero temperatures at a cost of $2 billion a year to the taxpayer, in order to keep up prices to consumers by another $1.5 billion...
...A proper incomes policy actually should go beyond even-handedness—to help lift the condition of those who havethe least...
...In agriculture, for 40 years we have had an active partnership between the private and public sectors to the advantage of the former...
...The voluntary approach of the Nixon years multiplied inequity...
...The eroded soil is gone, depleting the fertility of the land...
...an even greater majority resist the placement of an atomic generating plant in their backyard...
...BY GUS TYLER 11.GROWTH WITHOUT INFIATION Marx was an unfaithful disciple of Hegel: He interpreted the Hegelian dialectic as implying that struggle between capitalism and socialism would end in the complete victory of socialism...
...the choice of the right resources would check environmental pollution...
...Everybody passes along the bill: The provider charges the third party and the third party—private or government—passes on the cost in the form of higher premiums or taxes...
...by 1969, it was 10 per cent...
...At the moment, its use is uncertain for environmental and safety reasons...
...The argument will center on who should own and control the industry after the initial stages, when the risk has been taken and the facility has been established...
...Hence the need for new sources of energy...
...Within the United States," reports Lester Brown in his Building a Sustainable Society, "this mounting demand for food since mid-century, combined with the availability of cheap nitrogen fertilizer, has led farmers to abandon traditional rotation that included soil building pastures and hay, in favor of continuous planting of corn and other row crops...
...Meanwhile, the cost of labor fell from 33 to 18 per cent...
...Responses-4"(NL, September6), and "Left About-Face" (NL, September20...
...Medicine addresses itself to illness, to the sick...
...But in 1982, when an oil glut began to moderate the overall inflation, medical costs continued to race ahead...
...Nor can we count on a steady, affordable supply from abroad because of numerous unpredictables...
...To stimulate the "small" efforts, it can make available useful information and offer tax incentives or low-interest loans where investment is needed...
...Increasingly, the undercapitalized farmer went under...
...Some of the most impressive energy savings," observes Worldwatch Institute, "have occurred as a result of regulation...
...There are also microeconomic factors, special sectors of the economy that feed inflation—the most troublesome being fuel...
...The second group believes that the large scale is required for a metropolitan civilization, where urban and industrial density makes primary dependence on a waterfall, a windmill or a solar panel impractical...
...It is a way to put a ceiling on earned and unearned incomes, to cap the wage-price spiral...
...Beyond the immediate matter of coping with one of the four furies of inflation, producing an adequate and assured fuel supply would offer many other positive advantages: Energy independence would serve the nation well in times of international conflict...
...A comprehensive, consistent, collective national policy to preserve water and soil quite obviously cannot be devised, financed or enforced by the private sector...
...In hard times, they suffer most...
...But whatever regulations might be issued for future construction, the bulk of the stock would be old housing that wastes energy wantonly...
...Ever since the Great Depression, national policy has been aimed at curtailing the available food supply...
...Even a lowering of the rediscount rate by a mere one-and-a-half points, from 12.5 to 11 per cent, gave the housing market a shot of adrenalin in the pre-election weeks of 1982...
...We mention it again because in the period of transition to a society of plenty there is likely to be an interim when the country will have to suffer discomfort...
...During the two decades following World War II, approximately a million people a year moved from rural to urban America...
...yet not beyond achievement...
...That [lost] soil simply cannot be replaced within our lifetime or those of our children...
...The rate of inflation for housing from 1969-79 was 56 per cent greater than that for the non-necessities...
...The Ogollala aquifer, a huge basin of "fossil water" that is nonrenewable, is being drained at a dangerous pace, with land collapsing into the emptied space...
...Then some serious attention might be paid to creating an incomes policy?to bringing about greater economic equity...
...It is priced on a fee-for-services basis—a free enterprise concept...
...Promoting wellness would require training personnel who could teach good habits—how to eat properly, exercise, cope with stress, etc...
...By last year gas and oil consumption had dropped 10 and 15 per cent, respectively, below 1978—the peak year...
...Or, there may be an American variant where the owner is a quasi-public private corporation whose biggest investor, Uncle Sam, holds 49 per cent of the shares...
...The Dakotas were dickering with California to divert waters from the Missouri to the West, oblivious to all the other states down river on the Missouri screaming their protests...
...In the short run...
...It was the small farmer who was disappearing as average acreage per farmer rose from 215 acres to 380 acres, an 80 per cent increase...
...In our times health care has been added, as modern humankind has come around to the view that a sound mind in a sound body is a necessity...
...The rate of inflation for food was 50 per cent higher than that for non-necessities in the period 1969-79...
...Dealing with both situations requires the application of a collective intelligence and will within nations and among them...
...it would only require a small 180 degree turn to continue that partnership to the advantage of the public—a term that should include the small farmer...
...all wind up benefitting chiefly the big farmer...
...capital per se began to dominate agriculture through banks, dealers, insurance companies, conglomerates...
...putting the new resources in the hands of quasi-public corporations would provide a means of protecting the consumer and directing income into productive, rather than purely speculative, pursuits...
...finally, the Nixon controls did not touch profits...
...Wages were held down as each employer became a patriotic enforcer of the Administration's guidelines, but prices were not held down...
...by 1981, five out of 10...
...family...
...Theoretically, the object is to save the small farmer, who would be wiped out if our abundant output moved without restriction into the market place...
Vol. 65 • October 1982 • No. 19
