Commenting on yesterday’s Arthur Burns post, Measure-for-Measure says “Recall though that most OECD countries had elevated inflation. Some of this is technological: monetary authorities have simply gotten better at their job over the years.”
That’s what I used to think too, but this chart of inflation in the major industrialized economies convinced me it’s not nearly as true as people think:
Nobody got out of the 1970s without any inflation. But German and Japanese policymakers, when faced with inflation, took quick and decisive action to curb it. And they succeeded convincingly. US and UK policymakers needed a second round of inflation to act, and French policymakers required a third. But there was nothing preventing Arthur Burns from following the lead of his German and Japanese counterparts and acting decisively to curb inflation in the mid-70s. Doing so would have required him to prolong the 74–75 recession. That would have created political problems for Gerald Ford, but Burns himself had been reappointed in 1974 and his job was to conduct monetary policy appropriately not to boost the political fortunes of the Ford administration.
This is worth harping on a bit because I think the stereotype of left-wing government overindulging in monetary expansion is one of the factors holding back monetary policy at the current moment. In recent American history, however, the only really clear case of such an episode of highly politicized inflationary monetary policy is the Nixon-Ford-Burns period.