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Today, the complexities are devilish. In the unlikely event that Ford should choose to pump up a slumping economy by having the Government ladle out money, inflation could swell to even more unprecedented dimensions. The greater fear among some liberal economists is that he will give exclusive priority to fighting inflation by radically slashing federal spending and encouraging the independent Federal Reserve to keep a heavy hand on the nation's money supply, and thereby bring on a real bust. In July, the Council of Economic Advisers expected unemployment to rise to 6% before it began to come down. Now predictions of 6½% by mid-1975 are common. Walter Heller, a member of TIME's Board of Economists, foresees a jobless rate of nearly 7% as a consequence of a single-minded anti-inflation policy. Otto Eckstein, another member of the board, calculates that 8% unemployment, unseen for any long period since 1941, would be required for two full years to get the pace of price increases down to 4% a year.
As with the U.S., so with the rest of the industrialized world, or even more so. European and Japanese economists almost unanimously say that the U.S. is in the best position of any industrialized nation to bring inflation and unemployment down, a comment that is supposed to sound reassuring but seems to an American quite the opposite. The situation overseas is even worse. Britain faces inflation of more than 16% this year, despite persistent economic stagnation. Italy could present the world soon with the unique situation of a major country quite literally going bankrupt; the nation, struggling to cope with a surging inflation and paying sky-high oil bills, could run out of reserves with which to pay its foreign debts this fall. World inflation could easily lead to world recession. The way it could happen: each nation tries to control price increases by reducing demand; as each country buys fewer goods and services from every other, all economies go into eclipse together.
Even the word depression is appearing in discussion for the first time in decades. The Economist, a London weekly noted for judicious, unhysterical appraisals, predicts that the years 1974 to 1976 will probably be remembered as years of depression. In the U.S., a Gallup poll published last month found that 46% of adults feared a depression similar to the classic one of the 1930s. Oddly, such apprehension was more prominent among younger people, who have no personal memories of the disaster of 40 years ago, than among the middleaged.
No Cowboy. Such gloom can be overdone. Neither the U.S. nor the world can definitely be said to be in a recession yet. The 24-nation Organization for Economic Cooperation and Development forecasts some real growth in most major countries for the rest of this year.
In the U.S., the drop in production somewhat mystifyingly has not yet caused as much unemployment as economists would expect in an unmistakable recession. Arthur Okun, a member of TIME's Board of Economists, speculates that "businessmen may not be taking this slump seriously enough yet. They think it is temporary, and have kept people on payrolls," even though there is little work for some employees to do.