THE CRUELTY of this recession, and the long process of slowing down inflation, may have been in some degree inevitable. But it is a reproach to American policy that, despite much experience, this country can agree on no remedy to inflation beyond the kind of wringer that is now at work. As usual, the people injured most severely are those who are least to blame--people who understand neither what has happened to their previous prosperity, nor why.
Most of them are people who were leading steady, productive lives until, for reasons far remote from their shops and plants, they suddenly saw their livelihoods vanish. The usual justification of the wringer is that, however unattractive, it squeezes out the uncompetitive and inefficient. But things have gone far beyond that. When automobile production drops to half its previous level, in three years, a lot of people are left out of work regardless of their personal skill and diligence. With interest rates 10 percentage points higher than the inflation rate, a great many businesses strangle regardless of the quality of their management. It's all very well to say that, in time, labor and capital will shift to stronger industries. But for people with families, relocating is always wrenching and often impractical. As for capital, a vast amount of it has evaporated in bankruptcies and the long slide of the stock market.
There's no great mystery about the process now under way. More than 20 years ago, the American economy embarked on an enormous expansion, and people soon began to think that it would last forever. Sometimes their employers told them so. Their labor unions always told them so, loudly. Above all, the country's political leadership, of both parties, assured them that it was so. And, of course, it wasn't.
Wages rose faster as time went on--but in the late 1960s, the great expansion slowed and became irregular. By that time, unfortunately, the rapid rise in incomes was an entrenched habit and it continued regardless of growth rates inadequate to pay for it. Wages were not responsible for starting the great inflation of the 1970s, but they were, and are, the mechanism by which it is being perpetuated year after year. When the country's total output is not rising, higher wages for some people means, necessarily, lower wages for others--or none at all.
In an ideal world, the answer would be an incomes policy--a general agreement throughout society to limit wage increases to the increases in productivity. But it isn't an ideal world, and an incomes policy is evidently impossible in this country and in most others. Most Americans simply don't accept the idea that their wage increases affect other people's employment. Even this year, right into the trough of the recession, average wages have been rising faster than inflation--the wages, that is, of those people fortunate enough to have jobs.
The Democrats, in Philadelphia last weekend, continued to talk as though economic growth were merely a matter of presidential willpower, and low growth merely meant that the president didn't care. They know better than that. The Reagan administration, in its fixation with its income tax cuts, has managed to run the interest rates up far higher than disinflation requires, and it apparently has no good ideas about what to do next. Inflation is being slowed down. But it is time to say that it is being slowed down at a cost that this country should not continue to pay indefinitely.