Modern economy is different and more complex from primitive economy, says Michael Gilbert in his book “Reaganomics vs. the Modern Economy: The Conflict that divides America“. The defining characteristic of the modern economy is the ‘impossibility of true self-sufficiency.’ Today we cannot go out and supply ourselves with food, clothing and shelter. In order to survive, we need to buy our necessities with money from a store, to interact with the marketplace. This kind of economy does not bode well for the economic theory known as ‘Reaganomics’, a term used to describe the economic policies of President Ronald Reagan that promoted tax cuts, slashing of government spending and the deregulation of domestic markets.
The prevailing view is that the high oil prices stemming from OPEC’s cartel’s oil embargoes in the 1973 has caused the stagflation that inflicted so much damage to the US and world economy. But, Fed Chairman Arthur Burns argued in his book “The Anguish of Central Banking” in 1979 that the inflation appeared to be the result of a plethora of forces:
“the loose financing of the war in Vietnam, the devaluations of the dollar in 1971 and 1973, the worldwide economic boom of 1972-73, the crop failures and resulting surge in world food prices in 1974-75, and the extraordinary increases in oil prices and the sharp deceleration of productivity.”
Whatever the forces that caused the 1970s recession, the dominant view is that it was Reagan’s policies that ended it. Michael Gilbert does not agree with this view. The improvements in the American economy in the 1980s, he says, “has nothing to do with Reaganomics”. It was the market forces – a market correction that would take nearly ten years – that worked beautifully to end stagflation in the United States and the rest of the western world. In other words, Ronald Reagan was lucky and the misconception that somehow he turned the economy around has distorted US’s economic policy. Furthermore, it is responsible for the attack, shrink, shut down and underfund government.