The 1970s may have been chaotic, but the chaos made sense. Conflict sprang from a genuine debate over the distribution of resources that stagflation—the poisonous combination of runaway inflation and stagnant economic growth—made necessary. Fear of a return to that time is also a fear of confrontation, which is the essence of politics. Perhaps the most valuable work of economic history published since the turn of this century is Capitalizing on Crisis, sociologist Greta R. Krippner’s account of how the U.S. political establishment turned to finance from the 1970s onward as a solution to social discord. Krippner argues that slowing growth and rising prices created an acute distributional dilemma for the state. As public revenue dwindled, competition for it intensified. Initially, inflation allowed the state to defer making a choice between competing claims on the government budget, since it implicated every group in what Krippner calls a “game of leapfrog”: As companies passed on the rising cost of production to consumers in the form of price hikes, workers could apply pressure for higher wages, which would then further deteriorate corporate profits and provoke further price increases, leading to further wage increases, and so on. For governments in the 1970s, inflation represented an underhand solution to the distributional conflicts created by the end of growth. It offered “a surreptitious way for the state to say ‘no’ when it could not do so openly,” Krippner writes: “Social expenditures could increase in nominal terms while rising prices eroded the real value of these claims.”
The wage-price spiral that ensued throughout the 1970s, sending inflation even higher, did not reflect the labor movement’s indiscipline and irresponsibility, as conservative critics at the time pretended, but its strength. There were 289 major work stoppages on average every year throughout the 1970s; the years since 2010, an era of drastically reduced union representation, have averaged 15. The inflation of the 1970s was the stage for the last great contest between capital and labor. As unions won further concessions for workers, big business began to feel besieged; many top executives believed, as the authors of a 1976 volume on “the crisis of confidence in American business” wrote, that “the have-nots are gaining steadily more political power to distribute the wealth downward. The masses have turned to a larger government.” When today’s nostophobes evoke the chaos of the 1970s, what they’re really warning against is a resurgence in the power of labor, in the rule of the limited workday, the inflation-linked wage, and the protected vacation. Their true fear is a fear of workers.