Economics is still the dismal science for most educated Americans. It remains so despite the guys-and-dolls jargon of the risk-money side of the profession: greenmail, white knights, Ivan the Terrible, poison pills, golden parachutes, snake in the tunnel.
It remains so despite TV network simplifiers who use Barbie dolls, Monopoly paper money, piggy banks, scales and other props to try to explain the dismal world--the falling dollar, trade deficits, inflation, deflation, Third World debt. (I'm still waiting for some network financial pundit to stick pins into Barbie to explain voodoo economics.) Even such Laffer-a-minute punsters as Louis Rukeyser on the tube and Alan Abelson and Herb Stein in print often presume too much advance knowledge on the part of their audience. The latter are likely to be amused without being further educated.
Given this track record, it is extraordinary that William Greider has been able to make America's central bank, the Federal Reserve, and the long historic battle of American populism versus Wall Street come dramatically to life in this massive book.
In case you've forgotten, Greider is the former Washington Post assistant managing editor who plied David Stockman with breakfast coffee that acted like truth serum. Out of their long conversations came an Atlantic Monthly article and a book that rocked the economic composure of the Reagan Administration. It indicated that for some White House advisers Reaganomics was more about tax relief than cutting back federal government.
Greider has since switched to writing for Rolling Stone magazine. But this book belongs in the same category as two exposes by his former Washington Post colleague Bob Woodward. Where Woodward took American readers breathlessly inside those other temples of secrecy, the Supreme Court and the CIA, Greider penetrates a temple he would argue was even more subtly beyond the control of voters.
Americans certainly deserve to know how all of the machinery of their government really works. But in this work, as in Woodward's Supreme Court penetration, there are flaws. Greider has done a thorough research job. He has interviewed many of the principal characters of the Volcker era. He has been at pains to re-create the action as only an omniscient New Journalist can. He has done a superb job of clarifying the basic economic equations of monetary and fiscal policy. Through much--but not all--of the book he has tried to present opposing views of each economic move by the Fed or White House. And yet the overall effect resembles what the French say of their high school graduates: that they know everything--but nothing else.
Basically, Greider starts by giving you the impression he is hitting a clean single to center field. Actually he is stretching for an inside-the-park homer. The single is in his behind-closed-doors narrative drama that starts with Jimmy Carter's reluctant appointment of Paul Volcker, the Calvinist Catholic keeper of the nation's financial conscience. The narrative runs through the Volcker/Ronald Reagan era, with its great bull market, conservative rhetoric and massive deficits.
It soon becomes apparent that Greider is pulling his hit to left of center. And he is heading beyond first base.
First, he uses the short period from 1979 to almost the present as an opportunity to draw lessons about the whole span of American economic history.
In the foreground we see Volcker cutting a swath through stagflation, turning one steering wheel of the dual-control federal vehicle toward money-supply austerity and causing deep recession, while supply-siders wrench the other steering wheel, the budget, toward a national binge and huge deficits and indebtedness. What Greider particularly wants us to see in this foreground is a redistribution of America's income. Where the New Deal redistributed income to blue-collar and no-collar Americans, in Greider's analysis the Reagan era diverted it back toward white-collar and black-tie America.
Behind the Volcker drama--in the near background--we catch glimpses of a parade stretching through American history. From Alexander Hamilton to Andrew Jackson and early banker-bashing populists; through the Gilt Age and its Robber Barons; then to the advent of the income tax; to Woodrow Wilson and the founding of the Federal Reserve; on to Roaring '20s moves to counter the progressivity of the income tax, the Depression, and the conversion of conservative Mormon banker Marriner Eccles to Keynesian government pump priming; to Nixon's initial surprise at finding that he couldn't control his first Fed chairman; and finally back to the crucial change in Fed targets and tactics under Volcker.