International Reorganization and American Economic Policy.

• Author: Malamud, Bernard

These nine essays, written by Leonard A. Rapping from 1979 to 1987, deal with the unsettled times since the demise of the Bretton Woods system and with the prospects for structuring a new and stable, progressive and fair, American-led world order. The book is divided into three parts. In the first part, Professor Rapping surveys the interrelated problems facing the United States in the post-Bretton Woods era: structural trade and budget deficits; slow productivity growth and stagnant real wages; widening income inequality and mounting financial fragility; persistent inflation, unemployment, and high real interest rates; and the diminished confidence of businesses buffeted by volatile prices and beset by foreign competition. He next treats the monetary and international dimensions of these problems as manifested in high debt burdens, high interest rates, and high inflation rates. An essay on policies directed to a stable future concludes the volume. Rapping eschews abstract theories of all denominations throughout these essays. "Simple models," he states, "build cadres, not understanding." His commentaries, phrased in vivid historical-behavioral-institutional terms, are accessible to students and to policy-makers as well as to professional economists.

An enterprise economy, according to Rapping, requires credible regulation to contain the demon of uncertainty. Vital sectors of the U.S. and world economies were deregulated, however, in the 1970s and 1980s. The prices of foreign exchange and credit, of energy and transport, and, with the weakening of union power, of labor itself were increasingly exposed to the vagaries of market forces. Exchange rates and interest rates became objects of speculation and action was paralyzed by uncertainty. While a satisfactory future can only be assured by technology-driven supply side advances, not regulatory tinkering, restored confidence and renewed innovation await reregulation, particularly of finance.

Bretton Woods prosperity, in Rapping's view, rested on cheap energy and on the steady stream of new products which flowed from American industry, affording Americans monopoly rents. The oil shock up-ended this agreeable equilibrium. A period of intense conflict, of inflation and looming depression, ensued. Jealousy and suspicion supplanted consensus, domestic and international regulatory tools lost their potency, and the free market, with all of its imperfections, was the only option left for sustaining...