Back to Full Employment?
THE CRISIS which struck the world economy had a variety of causes. One was simply a version of the traditional nineteenth-century boom. In the late 1960s, all the industrialized nations had expanded their steelmaking and their shipbuilding and their car plants and their machine tools at the same time, inspired no doubt by all the splendid extrapolations which showed the growth of the decade extending until kingdom come. But then, in 1972, bad weather intervened, taking Russia into the great grain raid which cleared out America’s reserves and tripled prices throughout the whole interdependent world grain market. Within a year, the Arabs’ oil embargo quadrupled the price of their single wasting resource, and with this move, up went the prices of most other goods as a result of the energy incorporated in their production and distribution. This combination of potential overcapacity and bounding costs led everywhere to a slackening in the expansive drive and consequently to a sudden jump in unemployment.