Pivotal Decade: How the United States Traded Factories for Finance in the Seventies (review)

This book is better than its lurid title and cover suggest. It is a serious, albeit historically traditional, history of the 1970s. Like many current writers, Stein takes this eventful decade to be a pivotal one in postwar (that is, post-World War II) history. She builds this story from presidential papers and recounts events chronologically. The narrative is brisk, but details often get in the way of dominant themes in the sequential account. In her words, "The records do not demonstrate a rising conservatism, but a contentious polity (xiii)."

The book starts with the great compression of wages during World War II and goes rapidly to President Nixon's choices. Stein recounts the story of the "Nixon Shock," when the United States abandoned the Bretton Woods system, imposed a temporary wage and price freeze, and instituted a uniform 10 percent tax. Only the first of these actions was lasting, but it was enormously important for subsequent events. Stein gives the details of the complex negotiations around this event (40-50), but she fails to note how important Nixon's choice was, or even to include the Nixon Shock in the index.

Stein's focus on domestic policy is revealed in her equally detailed discussion of the Revenue Act of 1978 (192-204). She says, "The [1978] proposed tax changes revolutionized the way government promoted business investment. . . . It gave money to savers, not investors (194)." As is her wont, Stein concentrates on the intricacies of political negotiations, concluding, "[President] Carter ended up with the worst of all possible worlds (204)." Again, Stein chooses to look at the immediate political contests and ignores the rise of the financial sector that was an integral part of the succeeding decades—affecting the distribution of income and perhaps even causing our 2008-2011 crisis. One would not want to cite the Carter tax bill as the sole cause of this change, but consideration of the longer run would have helped the book in this matter as well as in the account of the Nixon Shock.

Stein's description of the second oil crisis and the poverty of economic thought about it includes a fascinating glimpse into the thinking of James Schlesinger, typically regarded as the originator of gas regulation in the 1970s. In a National Energy Plan presented to Congress in 1977, Schlesinger proposed a crude-oil equalization tax to be returned to consumers in tax credits (209). Given the recent demise of cap-and-trade in Congress, it surely is noteworthy that the hapless Carter proposed a simpler way to limit oil imports and consumption.

Stein closes her book with a brief look at the remaining two decades of the twentieth century with surprisingly little reference to the preceding account of the 1970s. Many publications have described how the economy after 1980 differed from the earlier economy. In writing about a pivotal decade, Stein clearly wanted to set the stage for this change. She provides a competent narrative, but she misses the opportunity to show how the events of the 1970s, the pivotal decade, set the stage for the Reagan revolution of the 1980s.