Robert Samuelson's New Economic History

While rightly blaming Greenspan for the economic downturn, Robert Samuelson gets a few things wrong in his Post column. First, he attributes the revitalization of the U.S. economy to the end of the double-digit inflation of the 70s. Actually, most of the drop in inflation had been completed by the early 80s. However, there was no uptick in productivity growth from the inflation-wracked 70s until the mid-90s. It is also worth noting that the whole world saw a sharp drop in inflation over this period with no noticeable uptick in productivity growth in the vast majority of countries. In short, there is no plausible link between the fall in inflation and economic revitalization that he touts.

It is also wrong for Samuelson to claim that the 2001 recession caused by the stock market crash was mild. In fact, the economy had considerable difficulty recovering from this crash, which is why Alan Greenspan left the federal funds rate at 1.0 percent for almost two years. While the recession officially ended in November of 2001, the economy shed jobs not just through 2001, but all through 2002 and most of the way through 2003. When it did finally start creating jobs it was only due to the growth generated by the housing bubble. Calling this a mild downturn is revisionist history.

--Dean baker

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