Consider the economy. In 1973, the Arab oil embargo definitively ended the postwar boom, plunging the West into a severe recession. More frighteningly, it shattered conventional wisdom in economics.
Inflation and growth rise and fall together, it had been believed, so high inflation and a stagnant economy with high unemployment was impossible. And yet, "stagflation" dominated the decade. Economists squabbled. Policy-makers drifted. Uncertainty reigned.
Economists have "little cause for pride," Friedrich von Hayek said in a 1974 speech accepting the Nobel Prize in Economics. "As a profession we have made a mess of things."
The crash of 2008 is our 1973 oil embargo. Economic verities collapsed like Lehman Brothers. Economists' debates increasingly resemble bikers' knife-fights. (When the economist Brad DeLong called World Bank President Robert Zoellick "the stupidest man alive," Nobel laureate Paul Krugman chided DeLong for being "much too kind.") And policy-makers swing this way and that, like rudderless boats in a storm. ("Massive stimulus spending is essential no matter what it does to the deficit! No, wait! Slash spending immediately or the deficit will destroy us!") It's only a matter of time before G8 leaders arrive at summits sporting brown leisure suits and bushy sideburns.
Another defining feature of the 1970s was the "energy crisis." Two huge spikes in the price of oil. Shortages at gas stations. Commodity prices exploding. And these weren't passing phenomena, experts were sure. Global oil production would peak "in the early 1980s," concluded a group of leading scholars. There was an expert consensus on that point. In 1978, the executive director of the International Energy Agency warned that "all available evidence" indicated oil prices would soar in the mid- to late-1980s, and so "there is a very great likelihood of a major worldwide depression."
Nobody needs to be reminded that we experienced a huge rise in oil prices up to 2008. They've fallen back since then but, just as in the mid-1970s, they're still far above what they were before the spike and everyone is nervously awaiting the next surge. So naturally, it's time for officials to scare the hell out of us with talk of peak oil.
Hello, International Energy Agency. Last week, the IEA issued a warning about peak oil. But with a twist: Peak global production of conventional crude oil actually passed in 2006, the IEA feels, but increases in unconventional sources and new discoveries will keep total petroleum production rising modestly for the next 25 years. Given the accuracy of the IEA's past long-term forecasts, the agency's modest optimism suggests we will soon be extras in a worldwide remake of Mad Max.
What else? Oh, yes. Declining American power. It was all the rage in the 1970s. Henry Kissinger was convinced the two superpowers would have to make room for three more equals. Or more. "Multipolarity," it was called. And is called. Because the conventional wisdom is exactly the same today. Go to Amazon, type in the words "America" and "decline," and spend the afternoon browsing.
And finally, there is that old chestnut, the gold standard.
In 1971, under pressure from budgetary and trade deficits, Richard Nixon effectively abolished the link between the U.S. dollar and U.S. gold reserves. Many were sure the move would end in disaster. "What is in your future?" wrote Howard Ruff in the 1978 book How to Prosper During the Coming Bad Years. "A grisly list of unpleasant events — exploding inflation, price controls, erosion of your savings (eventually to nothing), a collapse of private as well as government pension programs (including Social Security), vastly more government regulation to control your life, and eventually an international monetary holocaust which will sweep all paper currencies down the drain and turn the world upside down." How to Prosper in the Coming Bad Years was one of the best-selling business books of all time. Ruff's fans included soon-to-be president Ronald Reagan.
Of course, among mainstream economists, the debate about the gold standard was settled long ago. But this is That 70s Show. Everything polyester is new again. And so Robert Zoellick recently suggested governments return to the gold standard — prompting that comment about him being "the stupidest man alive" — before recanting, somewhat. Zoellick's comments unleashed a debate the like of which hasn't been heard since the days of disco and bell bottoms. Change a few names and dates and How to Prosper in the Coming Bad Years could be a bestseller today.
In fact, there are several current bestsellers that bear more than passing resemblance to Howard Ruff's classic. One was written by Peter Schiff, a popular pundit on business television who argues that the lack of a gold standard and out-of-control government spending will cause Zimbabwe-style hyperinflation, making the American dollar worthless, wiping out savings, and destroying the American economy. In a 2008 bestseller about the coming catastrophe, Schiff credited his understanding of economics to his father, Irwin Schiff — who argued in a 1976 book that the lack of a gold standard and out-of-control government spending would cause Weimar-style hyperinflation, making the American dollar worthless, wiping out savings, and destroying the economy.
As Marx said, history repeats. First, it's a tragedy. Then, it's a farce. It is our tragedy that we got the farce.