Economic predictions, November 1978

I've just come back to New York from a meeting, an editorial forum, of several experts who serve as advisors to an encyclopaedia. I say 'back' because the four-day meeting was held on a semi-tropical island whose newspaper was so local that the rest of the world might not have existed and where the only distractions from a head-to-head talk were the aquamarine sea and the coral reefs and the blazing oleanders and bougainvillea and the waving Australian palms and the cheerful monotonous thump of the old calypso songs. And when I said 'old', I mean 'old'. At one point, on a balmy night, the breaking of the waves was punctuated by a sort of choirboy tenor fluting away 'on the tenth of December in thirty-six, Mr Baldwin say we in a dreadful fix, it's love, it's love alone cause King Edward to leave the throne'.

Well, every morning at nine o'clock we sat down in our slacks and sports shirts and scuffed our slippers and rubbed minds together. There was a famous scientist and a famous educator – maybe the 'famous' tag had better be understood as attaching to the others – an American political commentator, an international expert, a man whose lifetime had been spent in his country's foreign service, an economist and a... a general commentator on the arts. They're each required in turn to give a report on what seems to be the most significant thing that's happened that year in their specialty. 

It's always a stimulating four days and the mere listener can learn fascinating, unheard-of things about the various ways, all unsuccessful, of stopping inflation, about the rather terrifying possibilities of cloning, about a general decline in literacy in American and English schools going along with the revolutionary uses of the computer whereby the pupil feeds in what he had to know and get back a recommended reading list – not just of books, but of the passages in expert sources that will provide the answers to naughty questions. We heard also about the growing fear among the Koreans, the Japanese and the Chinese of Soviet naval strength in the Pacific. And from the arts man, what has become with him an annual lament that in the Western world the governments and the courts seem to have given up on the effort to set limits to obscenity, to devise any applicable law that might, at one and the same time, protect the right of free speech and yet reasonably prohibit the ludicrous exploitation of it that has us all gasping in an ocean of pornography. 

Ah, the particular theme of this man took me back in memory 40-odd years when I arrived in Munich one summer, thinking of myself, if I'd ever been challenged, as a broad-minded sophisticated, emancipated – that was the great word, 'emancipated' – college boy and, in those days, of course, unshockable. Well, Munich in 1931 shocked me. Like everywhere else in Germany, it was in a listless way. It had too little energy to writhe in the pit of depression, a depression such as Britain and America could barely imagine. And yet, in Munich, the droopiness of the starving children and the melancholy of the middle-classes was offset in the grizzliest way by garish nightclubs and frantic gaiety and every sort of sexual diversion which we, in those stern days, called 'perversion.' 

A very earnest and pimply student told me darkly that Hitler would put a stop to all these goings-on. Anyway, the nasty point I'm coming to is that Hitler was in charge of the nation about 14 months later and, as the pimply boy guessed, one of the first things he did was to stop all those goings-on. 'Decadence', he screamed, and though he used the word about many new and vital movements in modern art he was surely right about the sleazy goings-on which embarrassed and depressed the pinching and pinched middle-classes who didn't know and didn't care about vital movements in modern art. 

Well, I've let this memory run its unpleasant course because the goings-on in our downtown movie houses and the big discos and the rather expensive salons which allow the chic and the well-heeled to put on Roman orgies as freely as we once used to dance the Charleston, these things go far beyond the scenes that shocked me in Munich and which Hitler so summarily crushed. And the one consolation, the one, big, missing ingredient which might encourage such a solution here is depression. But what would happen if there was a depression, if the pleasure hounds seemed to mock the breadlines, as they did in Germany in 1931? 

In the last depression, 1931/2 in this country, one family in three or four had nothing coming in. The breadlines everywhere were longer than a theatre queue anywhere. The river banks, in this country of a thousand rivers, were crowded with the tatty shacks of the dispossessed, and yet there was very little violence. You could wander anywhere in all the cities by day and night in the most depressed sections, Harlem in New York, East Saint Louis, downtown Los Angeles, and the very notion of harm to your person never crossed your mind. There was still, over the whole nation, what there is not any more, if not a strong religious faith, at least a code of taboos to which everybody subscribed. Things you did not do. Behaviour grounded in, some people would say, the old, original Puritanism, though all of Western Europe shared it. Behaviour, say, which you could better call 'a general respectability' that called crime 'crime' and public sexuality 'immoral.' Film stars, in those days, saw their careers ruined from behaviour which today would, if anything, give a fillip to their reputation as sports and swingers. 

I believed it would all end with a bang delivered by a dictator if a depression came. But we can now say happily there is no depression in sight. 'Not so', said our economic expert. Well, no depression but a fairly certain recession next year or in 1980 and no saying how firmly it could be held from sinking into a depression. 

The news magazine Newsweek has just tapped eight famous economists, bankers and labour leaders, and asked them to guess at the prospects of President Carter's anti-inflation programme, a voluntary system which began with stuffing $30 billion into the gap between the falling dollar and what the government believes to be its true value and which then hopes or begs business to settle for reasonable price increases and labour to settle for small wage increases. The immediate consequence of the president's programme was a rise in interest rates, enough to choke off money from the housing industry, depress inventories, make mortgages for you and me unbearably stiff and make people think twice before spending beyond their needs. And, as we've all seen in the Western world for the past decade or more, spending beyond one's actual needs is the lifeblood of prosperity. 

Well, of those eight experts, six say that a recession, probably next year, is inevitable. Two of them say that it's very probable and suggest without attributing any sinister intent to the president that he knew a recession was coming and that his new programme is a way of bringing it on as soon as possible so that the upturn would come in 1980 and leave him looking pretty smart before the next presidential election. 

The most, I was going to say 'gloomy' but maybe 'ruthless' of the group in Newsweek was not an American but a Swiss, the chief of a famous bank in Geneva and from that placid observatory, perhaps he's able to be a little more objective, certainly a little less tactful, than his American colleagues. And he says, and I'm quoting him, 'the United States is living way beyond its means and doesn't know how to bring its lifestyle under control. The consumer borrows' – and I believe here he means not only in actual loans but these days also on credit cards, the modern passport to imaginary affluence – 'the consumer borrows more and more every year. There was a growth in consumer debt of $50 billion in just this year alone and the federal budget deficit is of the same order. And by now only 12 per cent of the American gross national product goes into new investment for plant and equipment against 25 to 30 per cent in Japan.' 

His conclusion is that the president is not trying to avoid or postpone a recession but to precipitate one because he knows, I quote, 'it's unavoidable, in order to avoid something far worse later on.' 

Something far worse later on. That was almost the conclusion or the fear of our little group on the sub-tropical island. The scientist talked about the energy problem and saw our civilisation stuck with oil and coal. He warned us not to moon over the wonders of nuclear energy and solar energy which are hideously expensive and far away as a main source of our power. The international expert felt that the world was moving towards some fundamentally different power structure, though he couldn't say what, than that of two superpowers and their satellite allies. The expert on national affairs who usually winds up by proclaiming his faith in the basic goodness and energy of the American people was, for once, a pessimist. He was struck most by the people's growing distrust of Congress, of the presidency, of the courts, of the whole system and saw us as a people walking in gathering darkness. 

Well, we left the beautiful island in a more sober and melancholy mood than at any time in the 19 years we've been holding these annual meetings. And for better or worse, I thought it was worth saying so.

This transcript was typed from a recording of the original BBC broadcast (© BBC) and not copied from an original script. Because of the risk of mishearing, the BBC cannot vouch for its complete accuracy.

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