Inflation rising again

I've never been a firm believer, or for that matter a firm unbeliever, in ESP (extrasensory perception) which in my early years here had all kinds of people – psychologists, psychiatrists, journalists, magicians – trotting down to North Carolina to watch or hear Dr J. B. Rhine at Duke University report on his experiments with people who made correct guesses about things that could not be explained just by guesswork.

Once ESP lost its popular appeal, most people remembered it fuzzily as a power in the minds of some people that would predict things about to happen. Of course, it's a power claimed by all astrologists and by gurus, usually from India, who to this day draw large, rapt audiences in various parts of southern California.

I suppose anybody who's lived long enough has had the unsettling experience – it's happened to me half a dozen times – of wondering about some old friend, say, sitting down and writing to him and then hearing that, on that day, or just before, he had died. I'll settle for saying that the odds against weird coincidences are not as huge as the mathematicians say they are.

Anyway... just before I sat down to this letter, I reached for a shelf which contains nothing but reference books, almanacs, encyclopedias, political handbooks and the like, and pulled out what I thought was the world almanac for 1987. I opened it. It was not the world almanac. It was – how it got there, I don't know – the British Good Food Guide for 1972 and, in the instant of making this mistake, I realised that it was exactly what I wanted to start me off on the topic I'd vaguely decided to talk about.

I turned to the review of restaurants in London and, like a zombie heading for the guest bedroom, I fell at once on a favourite posh restaurant. The review ended by saying 'probably as good food of its kind, as exists in London'. The last sentence read, 'and at these prices, so it ought to be.' In the margin was the notation à la carte, three courses, £3.50, 1972. I recalled how in that year I used to urge my American friends to go to this place for the best food bargain in London. A first-class dinner, I'd say, for eight dollars. At that point, a similar dinner in New York would have cost almost double the price.

By the way, there's an interesting Anglo-American sidelight on that not very distant past, in the first few sentences of the review, it says, 'This has been a troublesome year for gastronomically discerning Americans. We send our salutations to Dr Linda McAllister of New York who was admitted for lunch in a trouser suit after a not wholehearted attempt to make an excuse and turn her away. Sympathy, also, to the gentleman from Minnesota who found that the terrine of duck was "good enough to make up for my annoyance at the management's refusal to accept American currency the day after Nixon floated the dollar".'

Now back to 1972 and the three courses for £3.50. My favourite news magazine recalls this week that very year and reminds us that unemployment seemed distressingly high, while inflation stood at an innocuous four per cent or so. Some heads of government, such as Richard Nixon and Edward Heath, had convinced themselves that inflation had an independence of its own which needed to be suppressed by laws and controls. They were busily boosting fiscal and monetary demand. Since exchange rates had just been unfixed – Nixon's suddenly free-floating dollar – each government was deprived of a valuable reminder that its boosting could go too far.

Ain't it the truth. We didn't know in 1972 that inflation was beginning to stoke up for a frightening launch. In Britain it was suddenly eight per cent, then twelve. I got out the 1976 Good Food Guide and my £3.50 dinner was then costing £7.80 and onwards and upwards, until I recall the shock of going back to London every year and beginning to learn the simple truth of compound arithmetic, that if you have 20 per cent inflation for three years in a row, at the end of the third year, the base that you're working from is 175.

For a few years, in the mid Seventies, America lagged comfortably behind but under Jimmy Carter, America, too, went into the heady atmosphere that is called double-digit inflation. Well, all that, as the sports commentators say about the last goal, the last putt, is history.

Reagan said double-digit inflation was an outrage and he stabilised real interest rates and then they took off and up and there was a brief recession. But to the great annoyance of those who were never in love with Mr Reagan, inflation went down and down and, in the past year or so, has been around three per cent, while – an unprecedented puzzle – unemployment has gone down to around seven and a half per cent.

We have come not to talk about inflation, though the 50, 60 per cent of Americans who regularly eat out continue to be aghast at restaurant food prices, which have never stopped rising in the past 15 years. That, however, is not due to any increase in the cost of food. It's an apparently insoluble reflection of the continuous boom in rents. This, I'm sure, is just as true in London as it is in New York, San Francisco, Chicago, Boston, any big city wallowing in the Reagan prosperity.

Things have gone hard with people running small old businesses, like my cleaner on the corner of Madison and 96th Street. He's been there for 30 years, more, but suddenly a year ago, he closed down. A paper pasted on the inside of the window said, 'Moved to Second Avenue.' I tracked him down there and he told me that when his lease was up at the end of that December, the landlord suddenly slapped him with not a 20 per cent or 50 per cent increase, but 100 per cent.

Same with a very successful and skilful periodontal dentist. For the years I've been going to him, he had a bright office overlooking Central Park. Last Christmas, his landlord suddenly announced that from 1 January his rent would be tripled. He's now in a dark office on Lower Madison Avenue. It's hard to convince such people that their misfortunes have nothing to do with consumer prices.

But now, we've just had a shock. The reappearance of the greedy face of inflation. The figures are in for the first six months of 1987. Consumer prices have been rising at an annual rate of five and a half per cent. This is higher than any rate we've known in the past five years. We haven't yet noticed a marked change in food prices, in the shops that is. Of course, once the restaurant owners discover their food bills are up five per cent, they'll increase the price on the menu by, say, ten per cent.

Where the change is noticeable is at the petrol stations. Last summer I was paying 79 cents, that's about, what, 55, 60p a gallon. Now it's $1.10 and rising. And this goes, of course, to the fact that oil prices are doubling and that goes to the other, more pressing, source of anxiety in the United States just now – the touchy, menacing situation in the Persian Gulf.

I've been tapping friends and loved ones of very different political bias for instant opinions about the administration policy. The conservatives, Republicans mainly, are uncertain and uncomfortable with the naval alert and the posting of all that seagoing hardware on the ground that the United States is probably the last country to have its vital – that is its oil – its energy interests imperilled, since it takes no more than six per cent of oil from the Gulf, whereas the Western Europeans take anything from 60 per cent up and the Japanese are almost wholly dependent on that source.

But, only the hawkish, right-wing Republicans echo, without question, President Reagan's and Secretary Shultz's and Secretary of Defense Weinberger's credo that the Persian Gulf is a vital strategic area for the United States and they then usually add that if America does not protect the tankers against the threats from Iran, the Russians will move in and do a deal and achieve without a shot their long-time ambition of bestriding the Gulf and so, in time, cutting off the vital supplies of Western Europe.

Now, the liberals, especially the liberal Democrats, with whom or by whom I am regularly ensconced, why, says a lady I'm very close to, why should we be there at all? Surely Britain and France and West Germany and Italy have a dire need to protect the flow of their oil and if they don't think there's a crisis, why should we think so?

But, across the country and the political spectrum, the same question is being asked by gung-ho conservatives and downright liberals. If the Kuwaiti and other oil tankers are in trouble or, as the vogue word has it, 'at risk', why aren't the Western allies cruising there whose real interests are all too obvious?

The answer – which we've been given, anyway – is that there has not been any real threat to the tankers until the United States moved in its high naval technology, minus minesweepers, and provoked a threat. I don't honestly know who's right, but it was a glum dispatch that came from Paris to the New York Times on Wednesday, beginning, 'The West European allies, with notable unanimity, have firmly distanced themselves from the Reagan administration's engagement in the Persian Gulf, fearful of militarising a political confrontation with Iran, they believe, could embroil them in conflicts beyond their control.

'For Washington,' it says, 'the most painful rebuff has come from Prime Minister, Margaret Thatcher.' Certainly, that is a wounding blow to that beautiful friendship.

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.

Letter from America audio recordings of broadcasts ©BBC

Letter from America scripts © Cooke Americas, RLLP. All rights reserved.