WHILE THERE may be a recession ahead, the economy was apparently growing surprisingly strongly over the summer. The preliminary figures, just published, show a modest but welcome pickup from last spring. Even if this cycle of sustained growth is now ending -- and that's not yet clear -- it raises an important question. Never before has the American economy had eight years, or anything close to it, of unbroken growth without the stimulation of war. What are the lessons here? What went right?
One factor stands out above all the others: excellence of monetary policy. The principal credit for this achievement goes to the skill and foresight of the Federal Reserve System under Paul Volcker up to 1987 and, since then, Alan Greenspan. The recession of 1981-82 was the deepest since the 1930s, and when the economy began to recover, it accelerated with the force of a tornado. Generally in the past the government has welcomed fast growth and encouraged it, only to see it crest after two or three good years and collapse into another recession. Instead, in 1984, Mr. Volcker intervened before the recovery got out of control. He put on the brakes by raising interest rates -- not a uniformly popular decision -- and the recovery continued on a less exciting but much more sustainable path.
Again, it looked as though the recovery was over when the stock market crashed three years ago. Mr. Greenspan and his colleagues steered safely through that disaster, succeeding for the first time in the country's experience in insulating the real economy of jobs and sales from a major financial convulsion.
But it hasn't all been the Federal Reserve's doing. A lot of businesses are using new technology in ways that help to stabilize growth. The classic recessions of the past involved massive accumulations of unsold inventories. Factories were shut down, and labor was laid off until companies could work their inventories down again. But currently businesses are using their computers to keep inventories under much closer control, avoiding the old pattern of involuntary overproduction.
Incidentally, one conventional explanation of the long expansions -- the huge budget deficits of the past decade -- is mostly wrong. It's true that a deficit stimulates growth, other things being equal. But other things haven't been equal. The budget deficits have been offset by almost equally huge foreign trade deficits. Amid much reckless and wanton budget botching, it has been intelligent policy elsewhere that has forestalled a recession longer than, a decade ago, would have seemed possible.