Because it happened exactly 50 years ago, people look to the Great Crash for a guide to the present. But the story of what happened in 1929 chiefly teaches how unlikely it is to happen again.
Far more instructive is the New Edonomic Policy that President Nixon announced on Aug. 15, 1971, for that event, though a missed opportunity, shows what is required for a president to take control of economic policy these days.
Panic in the stock market -- symbolized by Black Tuesday on Oct. 29 -- precipitated the trouble 50 years ago. The collapse of stock drove thousands of banks to the wall. Failure of the banks entailed a quick drop in consumer and business demand, and a recession in this country. Foreign debtors, cut off from American credit, eithr pulled back on purchases in this country or tried to step up exports. when their exports were blocked by the Smoot-Hawley tariff, the American recession spread through the industrial world.
Now a stock market collapse is virtually ruled out by the abundant funds in the hands of institutional and private investors here and abroad. Government stands ready to save banks and to prevent ruinous drops in demand. International institutions serve as fire breaks against world depression.
So the economic doomsday scenario now traverses different territory. The starting point is the "intrasigent inflaion" -- to use the term of Henry Kaufman of Saloman Brothers -- that has gripped the United States for the past 15 years.
That inflation means decline in what dollars will buy. But several hundred billion dollars are now held by foreign governments and institutions. The great danger is that they may panic in a mass flight from the dollar -- inducing trouble nobody can describe except as a catastrophe.
The day to avert catastrophe, accordingly, is to take in hand American inflation. But that involves doing a lot of things simultaneously over a long period of time.
One of the things required is a strong energy policy that prevents outsiders from restricting supply and hiking up prices in ways that promote both inflation and recession in the United States. Another is a monetary policy that prevents both excess borrowing and the kind of squeeze that yields a recession and recovery by overstimulation. A third requirement is a fiscal or budget policy that prevents both boom and bust. A fourth is an incomes policy that restrains price rises from feeding back into the system in the form of catchup wage increases, which only induce more price rises.
Various presidents have tried bits and pieces of this whole for short periods of time -- without success. Jimmy Carter has applied moderation in all things. But inflation surged in ways that intensified the energy problem and obliged the Federal Reserve Board to raise interest rates to a level that now threatens a nasty recession.
Gerald Ford had a tough monetary policy and a tough fiscal policy. But he was nowhere when it came to wage restraint, and in framing energy policy he had to yield to congresssional worries about recession.
Richard Nixon had a freeze on wage and price rises. But he had no energy policy and monetary restrictions were eased inways that fueled a boom, which blew off the inflationary the inflationary lid when the wage and price controls were lifted.
In August 1971 period is important because it is the last time all the elements of policy were drawn simultaneously into the hands of a president. Nixon and his advisers retired to Camp David in an atmosphere of crisis. In that atmosphere they were able to take braod action on the domestic and foreign economic fronts -- including the wage and price freeze.
The actions wre aborted and the opportunity missed because the economy was subsequently stimulated to avoid recession. But the lesson of what is possible in a crisis atmosphere suggests the need to elect in 1980 a president with a sense of occasion -- a capacity to use crisis to the maximum.
For nobody can doubt that the moment will soon be ripe again. History may not repeat itself. But the coninuing interplay of the same forces produces recurrent crises.