The Wealth of Nations

By GEORGE J. CHURCH

From boom to depression to prosperity to stagflation to--what?

Jobs, pay, prices, taxes--the heart of economic news--have been subjects of intense concern to ordinary citizens throughout history. Yet few trends in news coverage during the past 60 years have been more striking than the growth of business and economic reporting, in sheer volume, in sophistication and in influence on public opinion.

This shift mirrors a vast change in American and international perceptions. In the palmy days of the 1920s, the economy seemed to be a machine that ran automatically. It might develop rattles and knocks during wars and speculative panics, but most experts believed it should be left to follow its own self-correcting laws--i.e., be ignored. That comfortable belief has been destroyed by three generations of dizzying swings from boom to shattering global depression to unexampled post-World War II prosperity to the "stagflation" of the 1970s. The monthly trends in the consumer price index and the unemployment rate may bring joy, gloom or, frequently, bewilderment, but they are anxiously surveyed nowadays by millions.

Growing concern, however, has not made the economy much easier to interpret. Indeed, one of the characteristics of economic news is that its great turning points are shrouded in ambiguity and retrospective debate. With the rarest exceptions, the beginnings and ends of inflations, depressions and booms do not announce themselves with any event so unmistakable as the exchange of gunfire that opens a war. Thus, more than in most areas of the news, the stories reprinted here must stand as surrogates for many, many others.

The insane German inflation of 1923 was in part a singular event, a product of such particular circumstances as military defeat,

heavy reparations and the loss of major economic assets. But it wrought such psychological pandemonium and so thoroughly destroyed social as well as financial confidence that it still stands as the classic inflation of modern times. As such it remains a nightmarish symbol of a problem that has become perhaps the most persistent one haunting modern economies. Though the chronic inflations that bedevil the industrial West have never spiraled so totally out of control, the German mega-inflation nonetheless serves as a constant warning.

Stringent currency reform helped to subdue the German inflation, however, and the next five years developed into a kind of rosy blur in economic history. Not so 1929: it is one of those years, like 1776 or 1914, that is synonymous with a single event, in this case the Great Crash. Politicians and businessmen might keep saying that prosperity was just around the corner, but they could not still the anguished question that

TIME asked about one of the worst days in that debacle: "What then of 1930, or 1931, of even more distant times?"

The dismal answer came all too quickly. By 1933 the U.S. economy had spiraled down to a point so close to complete collapse that even those old enough to remember find it difficult to believe. One-fourth of the working force was unemployed, banks closed down, hungry men hunted for scraps of food in trash heaps. The Inauguration of Franklin D. Roosevelt marked a turning point perhaps most important for its assertion that economic recovery and revival could be achieved only with a substantial assist from the Government. While the Depression continued, it was softened by the New Deal's relief and reform measures. And with F.D.R.'s cry for "action, and action now," the Government assumed a commitment to alleviate suffering and restore economic health. That commitment has proved irreversible for all succeeding Administrations, conservative and liberal alike.

Real prosperity did not return until the end of World War II. But with the silencing of the guns and the conversion of wartime technology to peaceful uses, there began a generation of rising affluence throughout much of the world, of rapid growth in output and incomes that continued through the '50s and '60s. One of the early milestones of that era was the Marshall Plan of 1947, an act of imaginative statesmanship that started the rebuilding of the war-shattered economy of Western Europe into the mighty industrial engine of today. It also constituted formal recognition--fulfilling the promise of the monetary conference at Bretton Woods in 1944--that the U.S. and other economies share an interdependence, which has grown with almost every succeeding year.

Alas, the new economic Golden Age that seemed within reach in the Soaring Sixties failed to materialize. More than any other event, the Arab oil embargo and stunning price boosts of late 1973 signaled to the world that the long party was over. Those hammer blows did more than awaken the , West from its unconscious assumption that cheap energy and other natural resources would always be amply available; the price increases acted as a kind of gigantic consumer tax that gave a mighty push to the overlapping forces of inflation and unemployment that have plagued the industrial nations ever since. It is too early to know precisely what story will one day symbolize the transition from that period to whatever comes next. It is safe to predict, though, that the story will rate front-page headlines in newspapers and cover billing in magazines.

--By George J. Church This file is automatically generated by a robot program, so viewer discretion is required.