There are aspects of Pivotal Decade: How the United States Traded Factories for Finance in the Seventies by Judith Stein which are terrific, and others which are not so good.
To start with the positives, it's absolutely correct, I think, to identify the 70s as a key turning point in economic and political history, certainly in the US and UK. The Opec oil price shock, the breakdown of Bretton Woods, the after-effects of the Vietnam War and student protests, political realignment and the changing status of unions – Stein covers all of these as features of the decade that were to prove transformative. She also includes one economic fact that was new to me, namely that the 70s were the only decade of the 20th century other than the 1930s that ended with Americans being poorer (on average) than they were 10 years earlier.
The decade was bookended by two Republican presidents. In 1969, Richard Nixon repealed the investment tax credit enjoyed by businesses. He said: “We can never make taxation popular but we can make taxation fair.” In 1981 Ronald Reagan cut the corporate tax rate from 33.3% to 4.7% and announced a tax cutting package worth $750bn (in 1981 dollars) over 5 years. Stein's book underlines the point that Reagan (and Thatcher) were explicitly making an ideological departure, in contrast to Nixon's continuing Keynesianism at the start of the decade. We do know this but the contemporary sources quoted make it clear that nobody on the outside of their political circles appreciated it at the time. As in the UK, the immediate effect was to engineer a deep recession as the currency appreciated and scythed through traditional manufacturing industries, to the benefit of financial services. The book is a fascinating reminder of the power of ideology, actually, to remould society.
Its rich use of contemporary material is a real strength. I enjoyed the reminders of what the 70s felt like at the time (I was a teenager just beginning to be interested in current affairs and politics). However, for me it has some weaknesses too. Although we are now living in times when Keynes (or a version of Keynes) is back in fashion, Stein has a blind spot about the role high inflation played in changing economic policies. She describes the Fed as “obsessed with inflation” at a time (in 1979) the annual rate was running at almost 20%. Having lived through that time in a family with two working parents, both in unionised jobs, I can assure her that high inflation was the main reason living standards were lower at the end of the decade than at the start, save for those lucky enough to be in the upper reaches of the income distribution. Unemployment is a worse evil than inflation, but whatever the lessons of recent economic events, it still remains true that policymakers cannot use the short-term Phillips trade-off between inflation and unemployment without it breaking down over a longer period.
For me she also completely misses another fundamental reason for structural economic change, namely the gradual spread of computers in the workplace. Nascent as that was in the 70s, businesses were starting to cut out swathes of routine jobs (Nathan Ensmenger's The Computer Boys Take Over, reviewed here recently, describes this well). Perhaps I'm being obsessive myself – the policy debate didn't acknowledge the impacts of technology until much later.
All in all, Pivotal Decade wears its politics on its sleeve, which is no bad thing, and offers a fascinating overview of a period which feels like ancient history (viz Life on Mars) but had a decisive impact in shaping the economy we have today. And one doesn't need to be a raging Keynesian to accept that it's not in great shape.
