At the intersection of economics and politics

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An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy by  Marc Levinson, Basic Books, US $27.99, Pp 336, November 2016, ISBN 978-0465061983

Many economists view the third quarter of the 20th century, which followed World War II, as a golden age, followed by a quarter or so of gloom. The third quarter of the last century pointed to an era of global cooperation when a host of new international arrangements to assure steady exchange rates, ease restrictions on foreign trade, and provide economic aid to the poorest countries. From around 1973 to the end of the end century, Japan, North America and much of Europe and Latin America, the warmth of prosperity was replaced by cold insecurity. International cooperation turned to endless conflict over trade, exchange rates, and foreign investments.

In An Extraordinary Time, Marc Levinson argues, in every country where it occurred, the productivity bust left families incomes stagnant or creeping higher at rates that would have been deemed unacceptably slow a few years earlier. This was the new normal, the unhappy trend that neither the tonic of free markets nor the strong hand of government seemed able to alter. For the average family, slower income growth meant slower improvements in living standards. To be sure, incomes stretched a bit farther than they had in earlier  years because families were smaller, and almost everyone benefitted from wide spread material advances : smartphones and households computers became ubiquitous; proxy television sets were replaced by wide screens showing programs in stunning high definition; formerly incurable health problems could be diagnosed and treated with high tech equipment. But as weak growth undermined the financial viability of the welfare state, unemployment benefits grew less generous, pensions were frozen or vanished altogether, and tuition bills rose.

The Golden Age was an extraordinary time, and the generation that lived through it enjoyed extraordinary opportunity. It is the exceptional growth that appears unusual. Levinson says economic miracles do happen, but in most times and most places, economies grow slowly, bringing a gradual improvement in living standards punctuated by sudden bursts of euphoria and by recessions that throw unneeded workers on the street. Neither market-oriented economic policies, such as those championed by Margaret Thatcher and Ronald Reagan, nor statist reforms, such as those initially undertaken by Francois Mitterrand, have proven able to alter that reality. In Japan and Korea, massive state-guided investment booms, once the objects of breathless admiration around the world, brought explosive economic growth followed by rapid improvements in living standards – again, for a while. But those economies, too, eventually fell from orbit, their political leaders no longer able to deliver miracles.

Levinsonsays that the policies advanced for their purported power to increase long run economic growth may have precisely the opposite effect. This was the case with the structural adjustment programs of the 1970s, which channeled public and private resources into troubled industries unlikely ever to regain their previous heights, such as shipbuilding and steelmaking, rather than helping workers and communities prepare for the economy to come. Cuts in taxes on capital , measures to weaken labor unions, stricter  limits on corporate mergers, regulations to encourage or discourage the formation of large banks – all may enhance economic performance at one point in time but weaken it at another. Hope that wise, well-considered measures will propel an economy to a higher growth trajectory is eternal, but there are no foolproof recipes.

Levinson very adroitly explains why there was a boom in the post-war period and why it was followed by an economic slowdown. It is a scholarly study of an intricate economic phenomenon written for lay people. He also explains how politics influence economy. Levinson has unmatchable understanding of economics and an extraordinary ability to explain intricate economics to laymen. Reviewed by Jonathan T. Rich