The thesis of The Great Inflation by Robert J Samuelson is that the inflation of the 1970s was the basis for most problems through the 1970s and early 1980s and stopping it led to the recovery of the late 1980s, the boom of the 1990s and the bubbles of today. Samuelson, an editor at Newsweek and The Washington Post, takes a readable journalistic approach to explain the causes and effects of inflation and forecasting the risk if we repeat the same mistakes.

In the 1960s economists believed that they could maintain a balance of full employment by applying the Phillips Curve, which stated that there was an inverse relationship between unemployment and inflation. Because the government achieved an unemployment rate lower than full employment, the market grew increasingly inflationary. Loose monetary policy would “supply the oxygen that kept the fire burning,” in Samuelson’s words, who considers it one of the Fed’s great mistakes (the other being those at the Great Depression’s onset).

The political need to keep unemployment low kept both parties from risking the recession that would be necessary to kill rising inflation. Samuelson credits only Ford as setting the battle against inflation as his first priority. The reader is left to wonder whether Ford’s status as the only unelected president is both a cause and an effect of that decision. Samuelson credits Paul Volker and Ronald Reagan as those who finally killed inflation, noting that Volker set the policies for the economic bloodbath that did so, and Reagan enabled him politically.

Samuelson finally turns to the spoils of conquest in the successful war on inflation: economic growth, globalization, and the restoration of capitalism. Samuelson terms the result “precarious prosperity,” a new order in which we have higher wages and a better standard of living, but without stability. Society at large today has a mentality of entitlement, and will inevitably be faced with disappointment in the new order. The new order may be worse than the romanticized myth of the old order, but the reality of the old order was not nearly as great. Those who wish to return to the post-war consensus forget that the prosperity of the 1960s was propped up by the initial mistakes of the great inflation at home and the lingering aftereffects of the Second World War abroad.

Samuelson warns that we are in a similar place to where we were in the 1960s. Despite two decades of rapid growth, we look not to how far we have come but to how far we have yet to go. The ideal may be better than what we have today, but “just because something isn’t perfect doesn’t mean it can be improved.” There are four key tasks ahead. First, control inflation by tolerating occasional slowdowns in the economy. Second, raise the age at which Medicare and Social Security benefits begin. Third, come to terms with the costs and benefits of globalization. And finally, admit inability to control global warming without killing the economy and instead take bold steps in R&D and modest steps in emission control. None of these will be easy, but the great inflation was caused by government taking the easier path - and stopped when the difficult path was finally taken.

My analysis of Samuelson’s thesis focuses on several areas of discussion from the course, including the permanent campaign, special interests, fiscal and monetary policy, and the housing crisis and bank bailout. I conclude: “President Obama has repeatedly stressed the need to reform the health care system, military spending, and the entitlement programs in order to create a long-term path toward sustainability and balanced budgets. Like Keynes, he sees the need for government to step in and spend, even at the cost of incurring large deficits, in order to get the market moving again. Like Keynes, and unlike the new economics gurus of the 1960s, he also professes the need for government to step back when happy days are here again. While Samuelson may have unfairly criticized Keynes for the actions of his misguided disciples, the President will be fairly judged by whether or not he is able to overcome demoscoliosis and live up to his own words.”